1) According to new growth theory,

A) physical capital is nonexcludable.

B) knowledge capital is excludable.

C) knowledge capital is subject to increasing returns.

D) knowledge capital is rival and excludable.

2) Knowledge capital is nonrival in the sense that

A) two people can use the same knowledge to develop and produce a product.

B) firms do not compete to be the first to develop new technologies.

C) no single company can be excluded from the benefits of new technologies.

D) firms can benefit from the research and development of rival firms without paying for that benefit.

3) Which of the following government provisions would help increase the accumulation of knowledge capital?

A) patents

B) copyrights

C) education subsidies

D) All of the above are correct.

4) Which of the following government policies would most likely result in an increase in economic growth?

A) a decrease in the life of a patent from 20 years to 15 years

B) a decrease in the interest rate at which the government provides student loans

C) a decrease in government spending on grants issued through the National Institutes of Health

D) decreased copyright protection on music and movies

5) Creative destruction means that

A) firms develop new products that replace old products in the economy, thereby encouraging economic growth.

B) economic growth can only be sustained if capital depreciates rapidly.

C) knowledge capital can be created through a system of government subsidies for education and research and development.

D) research and development should only be financed if research and development is incremental (a result of making small changes to existing products).

6) Which of the following explains the ability of the U.S. economy to avoid diminishing marginal returns and experience accelerating growth in the early to mid-20th century?

A) continuing technological change

B) immigration

C) additions of a greater amount of capital of the same quality

D) a decrease in the quality of labor

7) By offering more generous unemployment insurance programs, European countries can expect

A) to pay less in taxes than in the United States.

B) workers to gain new skills quickly in response to fluctuations in the labor market.

C) shorter periods of unemployment for their workers.

D) longer periods of unemployment for their workers.