Question

Consider the economies of Sporon and Tralfamadore, both of which produce glops of gloop using only tools and workers. Suppose that, during the course of 40 years, the level of physical capital per worker rises by 5 tools per worker in each economy, but the size of each labor force remains the same.

Complete the following tables by entering productivity (in terms of output per worker) for each economy in 2020 and 2060.

Year	Sporon
	Physical Capital	Labor Force	Output	Productivity
	(Tools per worker)	(Workers)	(Glops of gloop)	(Glops per worker)
2020	11	30	1,800	_______
2060	16	30	2,160	_______

Year	Tralfamadore
	Physical Capital	Labor Force	Output	Productivity
	(Tools per worker)	(Workers)	(Glops of gloop)	(Glops per worker)
2020	8	30	900	_______
2060	13	30	1,620	_______

Initially, the number of tools per worker was higher in Sporon than in Tralfamadore. From 2020 to 2060, capital per worker rises by 5 units in each country. The 5-unit change in capital per worker causes productivity in Sporon to rise by a ( larger,smaller) amount than productivity in Tralfamadore. This illustrates the concept of (increasing returns, constant returns, inward- oriented growth, the brain dain, diminishing returns), which makes it (more difficult, easier)  for countries with low output to catch up to those with higher output.

Answer 1

Sporon productivity: 2020 Productivitv can be calculated as follows: Output Labor force 1,800 Productivity2020 30 - 60 Hence, the value of Sporon 2020 productivity is 660 2060 Productivitv can be calculated as follows: Output Productivity 2060Labor force 2,160 30 - 72 Hence, the value of Sporon2060 productivity is 72. Traliamadore productivity: 2020 Productivitv can be calculated as follows: Output Productivity02 Labor force 900 30 =30 Hence, the value of Sporon 2020 productivity is 30

2060 Productivity can be calculated as follows: Output Productivity 2060 Labor force 1,620 30 - 54 Hence, the value of Sporon 2060 productivity is 52. When the number of tools per worker was higher in Blahnik than in Tralfamadore and from 2020 to 2060, capital per worker is rises by 5 units in each country. The 5 units change in capital per worker causes productivity in Blahnik to rises by a smaller amount than productivity in Tralfamadore. This shows the concept of diminishing returns, which makes it easier for the countries with low output to catch up to those with higher output.