In the Solow Model with Technological Progress, by Increasing the Efficiency

question 73

Multiple Choice

In the Solow model with technological progress, by increasing the efficiency of labor at rate g:

• A) the real wage and the real rental price of capital both grow at rate g.
• B) the real wage grows at rate g but the real rental price of capital is constant.
• C) the real wage is constant but the real rental price of capital grows at rate g.
• D) both the real wage and the real rental price of capital are constant.

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Definitions:

Average Variable Cost

The variable cost of production (costs that change with output level) divided by the quantity of output produced.

Product Differentiation

A marketing strategy where a company attempts to distinguish its product or services from the competition.

Competitive Price-searcher

A market structure where firms have some control over their selling price because their products are differentiated, but they still face competition.

Entry Barriers

Obstacles that make it difficult for new competitors to enter a market, which can include high startup costs, regulation, or patent protections.