Economic Concepts During the Industrial Revolution
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Questions and Answers

What is the growing rate of the industrial sector per annum during the Industrial Revolution?

  • 1% per annum
  • 5% per annum
  • 4% per annum (correct)
  • 2% per annum

How long will it take for the industrial and agricultural sectors to be of equal size?

  • 100 years
  • 60 years
  • 74 years (correct)
  • 50 years

What is implied by the law of diminishing marginal returns?

  • Marginal product of labor increases consistently.
  • Each additional unit of labor has no effect on output.
  • Output will decrease as more labor is added.
  • Output increases but the marginal increment decreases. (correct)

Which factor has become less important in the economy during the Industrial Revolution?

<p>Land (A)</p> Signup and view all the answers

What are the three parts of technological development mentioned in the content?

<p>Invention, diffusion, innovation (B)</p> Signup and view all the answers

What characterizes micro-improvements in technology?

<p>They typically involve local changes with smaller investments. (B)</p> Signup and view all the answers

Why are macro-inventions more likely to develop in high-wage economies?

<p>High-wage economies have the capital for research and development investment. (A)</p> Signup and view all the answers

What is the expected outcome as technology becomes cheaper over time?

<p>Eventually, producers in all economies will take up the new technology. (C)</p> Signup and view all the answers

What is described as the 'elevator of growth' in the world economy?

<p>The increase in global capital-intensive production. (C)</p> Signup and view all the answers

What drives the demand for labor-saving technology in high-wage economies?

<p>The scarcity of labor leading to higher wages. (C)</p> Signup and view all the answers

What does the law of diminishing marginal returns imply about the relationship between production and factors of production?

<p>Increasing input of one factor typically leads to decreasing returns. (A)</p> Signup and view all the answers

Which of the following best describes economies of scale?

<p>Production changes resulting from proportional increases in all factors. (C)</p> Signup and view all the answers

What is the significance of GDP per capita in economic analysis?

<p>It indicates economic growth accounting for population size. (B)</p> Signup and view all the answers

According to the Fundamental Equation of Growth, what does gA represent?

<p>The overall productivity of combined inputs in production. (C)</p> Signup and view all the answers

Why is total factor productivity (gA) often considered a 'measure of our ignorance'?

<p>It is challenging to accurately measure or analyze its components. (A)</p> Signup and view all the answers

What significant change occurred around 1750 that impacted economic growth?

<p>Industrial Revolution started (C)</p> Signup and view all the answers

What does GDP per Capita measure?

<p>Comparison of living standards across countries (B)</p> Signup and view all the answers

Which region experienced significant wealth growth around 1820?

<p>Europe and the US (B)</p> Signup and view all the answers

Which is an example of a change in global economic standings observed in the Reversal of Fortune?

<p>Japan became wealthier than China (B)</p> Signup and view all the answers

What characterized the world economy in the year 1000?

<p>China as the richest economy (C)</p> Signup and view all the answers

What effect did the Industrial Revolution have on manufacturing distribution?

<p>Technological advancements spurred growth (B)</p> Signup and view all the answers

What significant result did the Agricultural Revolution have on societies?

<p>Establishment of sedentary societies (C)</p> Signup and view all the answers

What was a notable feature of the world's economic state in 1500?

<p>Isolated regions with limited interaction (B)</p> Signup and view all the answers

What is a characteristic of firms in a competitive market regarding pricing?

<p>Firms are price-takers and must sell at the market price. (A)</p> Signup and view all the answers

What determines the minimum cost for each level of production?

<p>The tangent point between the isocost and isoquant. (C)</p> Signup and view all the answers

Which of the following describes increasing returns to scale?

<p>Output increases disproportionately with input increases. (D)</p> Signup and view all the answers

What is included in fixed costs for a firm?

<p>Start-up costs and management overhead. (C)</p> Signup and view all the answers

How do variable costs change with production levels?

<p>They increase with every unit produced. (B)</p> Signup and view all the answers

Which of the following is true about the cost function?

<p>Total cost equals total fixed cost plus total variable cost. (D)</p> Signup and view all the answers

What does the concept of 'returns to scale' refer to?

<p>How the output changes in response to proportionate changes in input. (D)</p> Signup and view all the answers

What does the tangent point between isocost and isoquant represent?

<p>The optimal combination of labor and capital for cost minimization. (D)</p> Signup and view all the answers

What relationship indicates the profit-maximizing output for price-taking firms?

<p>P = MC = MR (B)</p> Signup and view all the answers

What remains constant for price-taking firms as they sell additional units?

<p>The price received for each unit sold (B)</p> Signup and view all the answers

What is implied by the concept of market equilibrium?

<p>Prices and quantities will adjust until demand equals supply (B)</p> Signup and view all the answers

Which of the following is NOT a factor that can cause demand shocks?

<p>Input prices increase (A)</p> Signup and view all the answers

What does the Law of One Price state?

<p>Transactions for identical goods in a competitive market occur at the same price (B)</p> Signup and view all the answers

Which outcome best describes a market in equilibrium?

<p>Neither consumers nor producers can be better off without making someone worse off (C)</p> Signup and view all the answers

How do supply shocks affect market outcomes?

<p>They can alter the structure of the market (C)</p> Signup and view all the answers

In the context of economic production, which of these aspects do we focus on?

<p>Voluntary exchange among economic agents (B)</p> Signup and view all the answers

Flashcards

Industrial Revolution

A period of rapid economic growth starting around 1750, characterized by new technologies, inventions, and industrial advancements.

Gross Domestic Product (GDP)

The total value of goods and services produced in an economy within a specific time period (usually a year).

GDP per Capita

A measure of a country's economic output per person. It helps to compare living standards across different countries.

Agricultural Revolution

A shift from hunting and gathering to settled agriculture, marking a significant change in human societies and economies.

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Reversal of Fortune

The reversal of economic fortunes. This refers to countries that were relatively wealthy in the past (e.g., some parts of Asia), but are now poorer compared to countries that were relatively poor before (e.g., Western Europe).

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Globalization

The period where trade and communication between different parts of the world became more interconnected and global.

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Economic Development

Economic growth that demonstrates a gradual upward trend, often leading to significant changes in the way people live, work, and interact.

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Hockey Stick of Growth

A graphical representation depicting the history of economic growth. It shows a period of flat growth before a dramatic upward surge, resembling the shape of a hockey stick.

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Law of Diminishing Marginal Returns

The idea that as you add more of one input (like labor) while keeping other inputs fixed, the increase in output will eventually get smaller and smaller.

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Malthusian Trap

The idea that population growth will outpace food production, leading to poverty and starvation.

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Innovation

The process of taking an idea and developing it into a usable product or process.

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Diffusion

The spread of new ideas and technologies from one place to another.

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Marginal Return

The change in production from adding one unit of a factor, while holding all other factors constant. It's almost always assumed to decline as you add more of the factor, known as the law of diminishing marginal returns.

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Economies of Scale

How production changes when all factors of production (like labor, capital, and land) are increased proportionally. This can be constant, increasing, or decreasing.

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Competitive Market (free market)

A free market model where businesses and workers freely compete. It's a common assumption in macroeconomics, though it has limitations.

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Fundamental Equation of Growth

A formula that breaks down the sources of economic growth, accounting for the growth in capital, land, and technology per worker. Explains how output per worker changes.

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Micro-improvements

Small, incremental improvements that enhance existing technologies, often developed through learning by doing. These innovations are cheaper to implement than large-scale inventions and can make existing technologies more efficient.

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Induced Innovation

The process where innovations are driven by the need to address specific challenges in a particular economic context. For example, high-wage countries often incentivize the development of labor-saving technologies.

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Elevator of Growth

The increasing use of capital (like machines and technology) in production, leading to economic growth over time. This is driven by new inventions and technological advances.

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Technology Diffusion

The spread of a new technology from one country or region to another. It happens as the technology becomes cheaper and more accessible.

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High-Wage Country vs. Low-Wage Country: Technology Adoption

Countries with higher wages tend to adopt new technologies faster, as they have a greater incentive to reduce labor costs. This can lead to further innovation and economic growth.

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Price-taker

In a competitive market, firms cannot influence the price of a good or service. They have to accept the market price determined by supply and demand.

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Market power

A firm's ability to influence the market price of a product or service. Firms with market power can set prices higher than their costs.

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Marginal Cost

The cost of producing one extra unit of output. Changes as the level of production changes.

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Average Cost

The total cost of production divided by the number of units produced. Includes both fixed and variable costs.

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Fixed Costs

Costs that do not change with the level of output. Examples include rent, insurance, or salaries.

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Variable Costs

Costs that vary with the level of output. Examples include raw materials, labor, or energy costs.

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Production Function

A representation of a firm's production technology. It shows the relationship between inputs (like labor and capital) and output.

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Isoquant

A curve that shows all the combinations of inputs that produce the same level of output. Used to find cost minimising combinations of inputs.

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Competitive Market

A market where many buyers and sellers interact, each unable to influence the market price. Each firm is a price-taker, meaning they accept the market price and sell as many units as they desire at that price.

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Market Equilibrium

A state where economic forces balance, resulting in no tendency for change in price or quantity. In a competitive market, this occurs when supply and demand are equal.

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Marginal Revenue (MR)

The additional revenue a firm earns from selling one more unit of output. In a competitive market, this is equal to the market price.

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Marginal Cost (MC)

The additional cost incurred by producing one more unit of output. Firms aim to produce where marginal cost equals the market price.

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Profit-Maximizing Output

The point where the additional revenue from selling one more unit is equal to the additional cost of producing that unit. This is where firms maximize profits in a competitive market.

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Demand Shock

A change in the market that affects the quantity demanded at any given price. Examples include changes in consumer preferences, income levels, or prices of related goods.

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Supply Shock

A change in the market that affects the quantity supplied at any given price. Examples include changes in input costs, technology, or the number of firms in the market.

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Law of One Price

The situation where the price of a good is the same across all buyers and sellers in a market. This occurs in a competitive market where no single buyer or seller can influence the price.

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Description

This quiz explores key economic concepts and phenomena that emerged during the Industrial Revolution. Questions range from the growing rate of the industrial sector to the implications of technological developments and the law of diminishing marginal returns. Test your understanding of how these concepts shaped the economy.

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