ECO360: Development Economics, Rizzo
December 4, 2004
Practice Questions for 4th Examination
1. True, False, Explain. Slower population growth is a sufficient condition for
economic development.
2. True, False, Explain. Slower population growth is a necessary condition for
economic development.
3. True, False, Explain. High female fertility rates in the LDCs can only be
explained by social and institutional factors in those countries.
4. Between 1900 – 2000, average life expectancy in the United States increased by
32 years (from 43 to 75) – implying that health advances led to increases in life
expectancy by ⅓ year per year. In some developing countries life expectancy is
currently lower than 45 years and our health technology is much better today than
it was 100 years ago. Therefore, it is not incomprehensible that average life
expectancy can increase much more rapidly in the LDCs than it has in the United
States. What would happen if science advanced fast enough such that average life
expectancy increased by more than 1 year per year?
5. Evaluate the following statement: “Copper is the major resource from which the
U.S. so heavily relies to prevent mold from forming on roofs in the wet areas of
the country. At current consumption rates, the world’s copper supply is expected
to run out in 50 years. Therefore, home prices in these areas of the country will
skyrocket as the year 2054 approaches.”
6. Why does a fall in a country’s crude birth rate substantially lag the fall in a
country’s death rates?
7. Evaluate the following statement: “Divorce rates in the LDC are much lower than
divorce rates in the United States. Therefore, family values and marriages are
much stronger in LDCs than in the United States.”
8. What are two major economic costs (as seen by Gary Becker) to having children?
9. What should happen to the economic costs of having children as countries
develop and income increases?
10. If it is true that the world’s supply of precious metals, oil, etc. is limited, then why
have the prices of may of these resources fallen over time rather than having
increased as these resources have been depleted?
11. Evaluate the following statement: “If the U.S. Congress decides to mandate that
all cars sold in the United States have a fuel efficiency of at least 30 mpg (average
today is in the mid-20s), the U.S. consumption of gas and total emissions would
fall.”
12. Can per capita income increase as populations increase? Why or why not?
13. Why are measured unemployment rates so much higher in LDC cities than in
LDC countrysides?
14. An increasing unemployment rate always signifies that the labor market is
“worsening.”
15. LDC rural labor markets often have low or zero measured unemployment rates.
What does this say about the health of LDC rural labor markets?
16. Unemployment rates in LDC cities are typically highest for wealthy and better
education individuals. If this is the case, does it make sense for an individual to
continue to pursue a higher education in the LDCs? Can you say anything about
when you would expect individuals to stop pursuing advanced degrees?
17. Describe why modern sector wages in the formal sector are higher than those that
would be required for the markets to clear.
18. What would happen to rural-urban migration if during the course of a stabilization
program during an LDC reform, governments sought to increase tax revenues by
recognizing the informal modern sector labor markets and banning activities such
as drug sales and prostitution? Comment on whether this would be a good thing
or a bad thing.
19. How will manufacturing firms’ choices of technology affect the unemployment
rates in LDC cities as people migrate from the rural parts of those countries?
20. Describe how the problem of child labor in LDCs can be thought of as a
coordination problem as we have seen in many cases throughout this course.
21. Would trade sanctions by developed nations against countries that use child labor
be successful in their goals of eliminating child labor? Why or why not?
22. How is it possible for the world to have avoided the Malthusian population trap as
its population has ballooned to 6 billion from 1 billion at the time of his writing?
23. What does it mean to say that development is “sustainable?”
24. Evaluate the following statement: “Average fuel economy in the U.S. has nearly
doubled since 1970. This would have been impossible without the yeoman-like
efforts of Ralph Nader and the environmental lobby.”