Ideas & Growth

Question 1

Define the terms rivalrous and non–rivalrous.

Answer 1

Something is rivalrous if its use by one person excludes its use by another person. Something is non-rivalrous if its use by one person does not exclude its use by another person.

Question 2

Explain why objects are rivalrous.

Answer 2

Objects are rivalrous because if I use an object I possess it and other don’t.

Question 3

Explain why ideas are non–rivalrous but excludable.

Answer 3

Ideas are not rivalrous because if I use an idea I don’t possess and everyone can still use the same idea.

Question 4

Explain why patents are required for innovation to take place.

Answer 4

Patents give monopoly power to the inventor of the idea. That insures that the inventor makes profits that pay for the initial fixed cost of invention. If there were no patents, then everyone could use the invention, he inventor would not make zero profits, and the inventor could not pay for the fixed costs.

Question 5

What is the growth rate of output per capita in the Romer Model?

Answer 5

It equals a constant times the population size.

Question 6

What is the growth rate of output per capita along a BGP of the Romer–Solow Model?

Answer 6

It equals 3/2 of the population growth rate.

Question 7

Explain why the growth rate of output per capita is larger in Romer–Solow Model than in the Romer Model.

Answer 7

In the Romer model, only At grows. In the Solow model, the growth of At leads to additional growth of Kt.

Question 8

Explain why there is sustained growth in the Romer and the Romer–Solow Models, but not in the Solow model.

Answer 8

In both models, research increases the stock of knowledge, which leads to sustained growth in knowledge. That leads to sustained growth in output.