Course
Price Theory
A working archive of classic price-theory exam and problem-set questions — the kind of problems that taught generations of economists to think with the tools of the trade.
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A growing, attribution-preserving collection of price theory problems — 477 so far, drawn from 40 archival sources: Chicago- and Columbia-style preliminary exams and problem sets from the Friedman, Becker, and Stigler era. Each is reproduced verbatim and linked back to its source — primarily Irwin Collier's Economics in the Rear-view Mirror. Search for a specific problem below, or browse by topic.
Historical wording is preserved as archival text. Exam-only scaffolding such as point values, time limits, and outer question numbers is omitted here so the material works as a reusable question bank.
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Showing 477 problems
- University of Chicago · Economic Theory (Ph.D. qualifying/written examinations) · 1932; 1933
Discuss the relationships between the conclusions and assumptions of the neoclassical school, the Weber-Sombart school, and the American institutionalists.
- University of Chicago · Economic Theory (Ph.D. qualifying/written examinations) · 1932; 1933
Trace the development of the demand concept from Adam Smith to the present, touching on the contributions of J.S. Mill, Cournot, Fleeming Jenkin, Walras, Böhm-Bawerk, and the statistical economists.
- University of Chicago · Economic Theory (Ph.D. qualifying/written examinations) · 1932; 1933
A producer of cement has a monopoly of the market in the area adjoining his plant, but is an insignificant factor in the rest of the country, where there are many competing producers. He can sell any desired portion of his output in the competitive market at the price there prevailing. Given the price prevailing in the competitive market, the demand schedule in his own monopolized market, his own average cost schedule, and any additional information which may be necessary for the solution of the problem, find the price he should charge in his own market, and the quantities he should sell in each market, to maximize his net revenue.
- University of Chicago · Economic Theory (Ph.D. qualifying/written examinations) · 1932; 1933
Answer (a) or (b), but not both.
- University of Chicago · Economic Theory (Ph.D. qualifying/written examinations) · 1932; 1933
Describe the history and status of the real cost theory of value.
- University of Chicago · Economic Theory (Ph.D. qualifying/written examinations) · 1932; 1933
Point out the resemblances and the differences between the preconceptions, the methods of analysis, and the conclusions, of Adam Smith and the physiocrates [sic], or of the mercantilists and the physiocrates [sic], or of Malthus and Ricardo.
- University of Chicago · Economic Theory (Ph.D. qualifying/written examinations) · 1932; 1933
Give some reasonable objectives for a centrally planned economy in a democratic state; state the grounds of your selection of objectives; indicate and discuss possible lines of procedure for realizing them through price control.
- University of Chicago · Economic Theory (Ph.D. qualifying/written examinations) · 1932; 1933
Explain and comment on the following in connection with interest theory;
- University of Chicago · Economic Theory (Ph.D. qualifying/written examinations) · 1932; 1933
Discuss the significant of variability of the proportions of the factors of production and of variability of the supplies of the productive factors for a marginal productivity theory of distribution.
- University of Chicago · Economic Theory (Ph.D. qualifying/written examinations) · 1932; 1933
Discuss the feasibility and merits of inflation in the present stage of the depression.
- University of Chicago · Economic Theory (Ph.D. qualifying/written examinations) · 1932; 1933
(Answer both parts)
- University of Chicago · Economic Theory (Ph.D. qualifying/written examinations) · 1932; 1933
(Answer either A or B)
- University of Chicago · Economic Theory (Ph.D. qualifying/written examinations) · 1932; 1933
The theory of marginal utility: its origin, principal forms or interpretations, your own view of its meaning and use in price theory, and the critical appraisal of its validity. Consider especially the relations between the use of the principle as an explanatory concept and as a premise for the discussion of social policy.
- University of Chicago · Economic Theory (Ph.D. qualifying/written examinations) · 1932; 1933
(Answer either A or B)
- University of Chicago · Economic Theory (Ph.D. qualifying/written examinations) · 1932; 1933
Show graphically the effect of lowering the tariff on sugar. (Assumed domestic and foreign demand and supply curves given, and neglect any disturbances in the balance of international payments.)
- University of Chicago · Economic Theory (Ph.D. qualifying/written examinations) · 1932; 1933
Briefly characterize and evaluate comparatively what you considered the significant “approaches” or methodologies in economic science. (The following are to be taken as suggestive catch-words: classical, inductive, institutional, historical, deductive, price theory, sociological, socialistic, control.) We are possible, cite examples of the different tendencies in the history of economic thought from the Greeks to the present.
- University of Chicago · Economic Theory (Ph.D. qualifying/written examinations) · 1932; 1933
State the classical doctrine of international gold flows and price levels and discuss some recent criticism of this doctrine.
- University of Chicago · Economic Theory (Ph.D. qualifying/written examinations) · 1932; 1933
“The primary cause of business depression is the rigidities of the price structure.” “Through their alternating contraction and expansion of the circulating medium the banks are responsible for the wide swings in industrial activity.” Discuss these statements.
- University of Chicago · Economic Theory (Ph.D. qualifying/written examinations) · 1932; 1933
Discuss the theoretical short-comings involved in a policy on the part of our federal government of progressively bidding up the price of gold in foreign markets.
- University of Chicago · Economic Theory (Ph.D. qualifying/written examinations) · 1932; 1933
If business recovery came without the assistance of governmental inflation it would be accompanied by an expansion of the circulating medium as a result of the lending operations of the commercial banks. What significant similarities and differences are there between such expansion and (a) government borrowing from the banks in order to finance public works, (b) outright “greenbackism”?
- University of Chicago · Economic Theory (Ph.D. qualifying/written examinations) · 1932; 1933
It has been argued that in as much as the demand for capital goods is a derived demand it follows that any voluntary saving will necessarily result in some degree of unemployment. That is to say, the savings will reduce the demand for consumers’ goods, thus reducing the demand for capital goods, and consequently not all the savings will be borrowed; hence unemployment. But the commercial banks, through their power to create circulating medium, make it possible for entrepreneurs to obtain the funds with which to create capital goods without the reduction in consumer demand which comes with saving. Hence the banks furnish a means of escape from the dilemma. Discuss.
- University of Chicago · Economic Theory I and II (Preliminary Examination) · M. Friedman, chairman; F. H. Knight; D. G. Johnson, 1955
Indicate whether each of the following statements is True, False, or Uncertain and justify your answer briefly.
- University of Chicago · Economic Theory I and II (Preliminary Examination) · M. Friedman, chairman; F. H. Knight; D. G. Johnson, 1955
In an article on the British tobacco industry, the Economist remarked:
- University of Chicago · Economic Theory I and II (Preliminary Examination) · M. Friedman, chairman; F. H. Knight; D. G. Johnson, 1955
Assuming that a monopolist always fixes price so as to maximize profits, can the price of a commodity ever be lower when it is monopolized than when it is competitively produced?
- University of Chicago · Economic Theory I and II (Preliminary Examination) · M. Friedman, chairman; F. H. Knight; D. G. Johnson, 1955
Trace the development of the theory of consumer choice. Include in your answer an explanation of (a) the meaning attached by Smith to “effectual demand”, (b) the role assigned by Ricardo to demand in determining prices; (c) Jevons “the final degree of utility determines price”; (d) the contribution of Edgeworth, Fisher, and Pareto.
- University of Chicago · Economic Theory I and II (Preliminary Examination) · M. Friedman, chairman; F. H. Knight; D. G. Johnson, 1955
It is widely asserted that workers have less “bargaining power” than employers because there are more workers than employers. Discuss.
- University of Chicago · Economic Theory I and II (Preliminary Examination) · M. Friedman, chairman; F. H. Knight; D. G. Johnson, 1955
Discuss the following concepts (a) the “postponement” of consumption said to be involved in saving and investment, (b) “abstinence”, (c) “time preference”, (d) the “marginal efficiency of investment”, (e) the “marginal efficiency of capital”.
- University of Chicago · Economic Theory I and II (Preliminary Examination) · M. Friedman, chairman; F. H. Knight; D. G. Johnson, 1955
For each of the following methods of financing radio and television programs, indicate how the resulting structure of programs differs from the optimum: and under what conditions, if any, it would be an optimum. In interpreting “optimum”, assume that the only consideration is direct private benefit from the programs; neglect distributional effects, i.e., treat it as a purely allocative problem; and assume that there are no such public issues involved as “education” or “indoctrination”. On the technical side, assume throughout that there are a narrowly limited total number of frequencies or channels available in any one area. Make your answer as definite as possible in terms of the kind of people whose tastes are or are not catered to appropriately, the kinds of programs that are too numerous or too sparse, etc. In answering the question, assume throughout that it is possible without cost to know exactly the number and kind of people who listen to each program.
- University of Chicago · Economic Theory I and II (Preliminary Examination) · M. Friedman, chairman; F. H. Knight; D. G. Johnson, 1955
Using the Table below, explain the variations in the real income, the price level, the velocity of circulation, the government and private investment, the rate of unemployment, the ratio of savings to income, and whatever else you consider significant.
- University of Chicago · Economic Theory I and II (Preliminary Examination) · M. Friedman, chairman; F. H. Knight; D. G. Johnson, 1955
It is often said that the U.S. economy is less likely to suffer a severe depression today than it was twenty or thirty years ago. List and discuss major changes which have taken place which bear on this statement.
- University of Chicago · Economic Theory I and II (Preliminary Examination) · M. Friedman, chairman; F. H. Knight; D. G. Johnson, 1955
Suppose the tax on capital income (dividends, interest) is increased. What will be the effect on the demand for cash if the tax proceeds are spent on: (a) aid to foreign countries; (b) federal contribution to medical aid in the United States.
- University of Chicago · Economic Theory I and II (Preliminary Examination) · M. Friedman, chairman; F. H. Knight; D. G. Johnson, 1955
In the Confederate States, the ratio of bank reserves to deposits grew rapidly during 1862-64. This ratio also grew in the period 1933-37 in the Unites States. Explain these phenomena. Evaluate the action taken by the Governors of the Federal Reserve Board in 1936 and 1937, when they raised the required minimum reserve ratio.
- University of Chicago · Economic Theory I and II (Preliminary Examination) · M. Friedman, chairman; F. H. Knight; D. G. Johnson, 1955
The stock of money (currency and demand deposits) per capita was about 800 dollars in June 1953 as against about 100 dollars in June 1910. Explain the increase.
- University of Chicago · Economic Theory · F. H. Knight (chair), O. H. Brownlee, M. Friedman, L. A. Metzler, 1949
(a) Discuss and evaluate alternative theories of “Profits” as a distributive share.
- University of Chicago · Economic Theory · F. H. Knight (chair), O. H. Brownlee, M. Friedman, L. A. Metzler, 1949
Write briefly on the meaning of the capital concept and its importance in interpreting economic growth or change. Relate your discussion to the case of a Crusoe economy and state whether (and if so how) the principles are different for the competitive pecuniary social order.
- University of Chicago · Economic Theory · F. H. Knight (chair), O. H. Brownlee, M. Friedman, L. A. Metzler, 1949
With reference to federal legislation assuring to every resident in the U.S.A. medical care by the physician and hospital of his choice, free and with no special taxation: Appraise the proposal as to effects upon general welfare, assuming that the alternative is the sale of medical insurance, not subsidized, but with the same distribution of personal income effected by cash “relief”.
- University of Chicago · Economic Theory · F. H. Knight (chair), O. H. Brownlee, M. Friedman, L. A. Metzler, 1949
Briefly discuss the familiar diagram of a family of short-run cost curves for a firm, with an “envelope” as a long-run curve. State the main “cases” for price-equilibrium under monopoly and under “perfect competition.” Explain why the point of tangency with both curves descending may be such an equilibrium-supply, and particularly why it locates the minimum cost for the corresponding output.
- University of Chicago · Economic Theory · F. H. Knight (chair), O. H. Brownlee, M. Friedman, L. A. Metzler, 1949
Briefly outline or list the main features of the Ricardian theories of value and of distribution and contrast each point with a “sound” modern view.”
- University of Chicago · Economic Theory · F. H. Knight (chair), O. H. Brownlee, M. Friedman, L. A. Metzler, 1949
Assume an economic system in which real expenditure upon goods and services (real consumption, investment, government expense) is a function of real income and the interest-rate; show that the set of values which satisfy the conditions for equilibrium in the commodity market (make real savings and investment equal) need not contain the “full-employment” income level; i.e., that level of real income which would be produced when the quantity of labor supplied equals the quantity demanded, both the labor supply and labor demand being functions of the real wage.
- University of Chicago · Economic Theory · F. H. Knight (chair), O. H. Brownlee, M. Friedman, L. A. Metzler, 1949
Under the so-called “security-reserve proposal” member banks would be required to keep a supplementary reserve against deposits over and above the reserves they are now required to keep in the form of a deposit with a Federal Reserve Bank. This supplementary reserve could be in the form of government securities.
- University of Chicago · Economic Theory · F. H. Knight (chair), O. H. Brownlee, M. Friedman, L. A. Metzler, 1949
It is a common view today that an equal reduction of both taxes and governmental expenditure would contribute to an increase of the national income or counteract a tendency to depression. State your position and discuss carefully.
- University of Chicago · Economic Theory (Old Rules) Preliminary Examination for the Ph.D. and A.M. Degrees · Milton Friedman (chairman), Martin J. Bailey, Lawrence Fisher, 1960
Define briefly the following terms and indicate their use in economic theory:
- University of Chicago · Economic Theory (Old Rules) Preliminary Examination for the Ph.D. and A.M. Degrees · Milton Friedman (chairman), Martin J. Bailey, Lawrence Fisher, 1960
Describe the cost curves for an individual firm, explaining the relation between short-run and long-run curves, average and marginal cost curve. Explain the equilibrium of the firm for various market conditions of competition.
- University of Chicago · Economic Theory (Old Rules) Preliminary Examination for the Ph.D. and A.M. Degrees · Milton Friedman (chairman), Martin J. Bailey, Lawrence Fisher, 1960
The U.S. Steel Corporation produces about one-third of the total ingot steel production in the United States (and a similar proportion of mill shapes and other forms of steel sold to steel-using industries). If the price elasticity of demand for steel is -0.5, what is the minimum absolute value of the elasticity of demand facing the U.S. Steel Corporation? What is the maximum absolute value? What can you conclude, without further information, about the monopoly power of the U.S. Steel Corporation? What further information, if any, would be relevant, and why?
- University of Chicago · Economic Theory (Old Rules) Preliminary Examination for the Ph.D. and A.M. Degrees · Milton Friedman (chairman), Martin J. Bailey, Lawrence Fisher, 1960
It is sometimes alleged that unionized firms are not injured by competition with non-union firms in the same industry because the presence of the union wage scale and working conditions enables the firm to obtain better quality labor, to have better labor morale and labor relations, etc.
- University of Chicago · Economic Theory (Old Rules) Preliminary Examination for the Ph.D. and A.M. Degrees · Milton Friedman (chairman), Martin J. Bailey, Lawrence Fisher, 1960
A consumer buys in perfectly competitive markets, spending all of his income. Over a period of time his income changes and prices change, but it is our hypothesis that his tastes do not change.
- University of Chicago · Economic Theory (Old Rules) Preliminary Examination for the Ph.D. and A.M. Degrees · Milton Friedman (chairman), Martin J. Bailey, Lawrence Fisher, 1960
What are Marshall’s four propositions on derived demand? What subsequent contributions have been made concerning these propositions? In the light of these contributions, how would the propositions now be correctly and fully stated?
- University of Chicago · Economic Theory (Old Rules) Preliminary Examination for the Ph.D. and A.M. Degrees · Milton Friedman (chairman), Martin J. Bailey, Lawrence Fisher, 1960
Write a brief essay on TWO of the following men and their contributions to economics:
- University of Chicago · Economic Theory I — Preliminary Examination for the Ph.D. and A.M. Degrees · Milton Friedman (chair), W. Allen Wallis, D.G. Johnson, 1955
Indicate whether each of the following statements is true (T), false (F), or uncertain (U). Give a brief explanation of your answer.
- University of Chicago · Economic Theory I — Preliminary Examination for the Ph.D. and A.M. Degrees · Milton Friedman (chair), W. Allen Wallis, D.G. Johnson, 1955
“East coast gas wars are forcing big producers to chop prices to retailers. With some Manhattan service stations selling gas as low as 15.8¢ per gallon, Socony Mobil, Esso Standard Oil and others have cut wholesale prices up to ½¢ per gallon in most of the seaboard marketing area from Maine to Washington, D.C., the first price reduction in nearly a year” Time, July 25, 1955.
- University of Chicago · Economic Theory I — Preliminary Examination for the Ph.D. and A.M. Degrees · Milton Friedman (chair), W. Allen Wallis, D.G. Johnson, 1955
Fair trade is now rapidly disappearing. However, a few firms (Sunbeam, Schaeffer) are actively trying to enforce fair trade pricing.
- University of Chicago · Economic Theory I — Preliminary Examination for the Ph.D. and A.M. Degrees · Milton Friedman (chair), W. Allen Wallis, D.G. Johnson, 1955
A recent court decree requires a company (The United Shoe Machinery Co.) which heretofore has only leased its machines, for which there are at present no competitors, to offer them for sale at prices which will make it neither more nor less advantageous to buy than to rent the machines. How can such prices be determined, and by what criteria can it be determined whether a given price meets the requirement?
- University of Chicago · Economic Theory I — Preliminary Examination for the Ph.D. and A.M. Degrees · Milton Friedman (chair), W. Allen Wallis, D.G. Johnson, 1955
Discuss the role of “Euler’s theorem” in distribution theory, and give your own position on the issues.
- University of Chicago · Economic Theory I — Preliminary Examination for the Ph.D. and A.M. Degrees · Milton Friedman (chair), W. Allen Wallis, D.G. Johnson, 1955
Define (a) perfect competition, (b) oligopoly, (c) monopoly, (d) monopolistic competition, (e) cartel, (f) monopsony.
- University of Chicago · Economic Theory I (Preliminary Examination for the Ph.D. and A.M. Degrees) · 1957
Indicate whether each of the following statements is true (T), false (F), or uncertain (U). Explain briefly the basis for your answer.
- University of Chicago · Economic Theory I (Preliminary Examination for the Ph.D. and A.M. Degrees) · 1957
“It is too obvious for argument that a single employee bargaining with a great corporation, or even with a moderately small employer, is under a disadvantage, except perhaps in time of serious labor shortage”. (Arthur Larsen, A Republican Looks at his Party, p. 125)
- University of Chicago · Economic Theory I (Preliminary Examination for the Ph.D. and A.M. Degrees) · 1957
Derive a demand function for a factor of production. What does it depend on? What things are held constant in the derivation?
- University of Chicago · Economic Theory I (Preliminary Examination for the Ph.D. and A.M. Degrees) · 1957
a) What was Malthus’ theory of population? In answering, distinguish explicitly between the two variants of his theory, according to the character of the restraints on population.
- University of Chicago · Economic Theory I (Preliminary Examination for the Ph.D. and A.M. Degrees) · 1957
In the analysis of supply, an important role is played by a fourfold classification of economies or diseconomies of production: internal and external, each of these cross-classified as pecuniary and technical.
- University of Chicago · Economic Theory I (Preliminary Examination for the Ph.D. and A.M. Degrees) · 1957
“The interest rate measures the rate of time-preference. Therefore, in a community, the members of which are as anxious to provide for the future as for the present, the rate of interest will be zero. But the rate of interest also equals the marginal productivity of capital. It follows that in such a community the marginal productivity will be zero”.
- University of Chicago · Economic Theory I (Preliminary Examination for the Ph.D. and A.M. Degrees) · 1957
The U.S. government currently guarantees a large fraction of mortgages on newly-constructed houses through the Federal Housing Administration and the Veteran’s Administration. The government guarantee naturally makes these more attractive than non-guaranteed mortgages and so leads to their being available at a lower rate of interest. Recently there has been a decline in residential building. Representatives of the industry have suggested that one means of stimulating building would be to extend the government guarantee to mortgages on existing houses. They claim that the higher cost of mortgages on such houses inhibits their sale and thus prevents individuals currently owning houses from coming into the market for new houses.
- University of Chicago · Economic Theory I · 1957
Indicate whether each of the following statements is true (T), false (F), or uncertain (U). Explain briefly the basis for your answer.
- University of Chicago · Economic Theory I · 1957
Suppose the armed forces want to raise a fixed number of men. One way to do this would be to set a price at which the number of volunteers would equal the number wanted. Another way would be to set a lower price and draft the difference between the number wanted and the number volunteering. Assume that each person receiving a draft notice would be permitted not only to enter as a draftee but also either to buy a substitute or to be a substitute for someone else.
- University of Chicago · Economic Theory I · 1957
In a recent study, David Blank and George Stigler note the existence of an interrelation between the demand for higher education and the supply of faculty for institutions of higher education. “For”, they write, “the very presence of a much increased demand [for higher education] … carries with it a much increased supply of trained individuals” from whom faculty members can be recruited.
- University of Chicago · Economic Theory I · 1957
Producers in one area of goods that are also produced elsewhere often claim that the distant producers keep their high quality product at home and sell only their low quality goods elsewhere. On the other hand, consumers often complain that local producers ship all their high quality products elsewhere and sell only the poor quality material locally (as in the standard California complaint that you can’t but a decent orange in retail markets in California). Obviously, either group might be right in some special case. But can you think of any general factors that would on the average tend to produce the one result or the other? I.e., in any particular case, what indirect information would you consider relevant in forming a judgment about which was right?
- University of Chicago · Economic Theory I · 1957
We frequently speak of “the substitution of capital for labor”. What do you take this phrase to mean (a) for an individual firm; (b) for the economy as a whole? Does your interpretation allow for the fact that the major part of the cost of new capital equipment is labor cost?
- University of Chicago · Economic Theory I · 1957
Indicate briefly the meaning of each of the following phrases, identify the economist (or economists) associated with each, and state his major contribution to economics:
- University of Chicago · Economic Theory I · 1957
Many families carry life insurance for the husband, and very few carry it for the wife or children. There have been several attempts to explain this. Some say that the loss from the death of the wife or children is mostly a psychic loss, and psych losses cannot be insured. Others say that the loss from the death of the wife or children is too small to be worth insuring. Evaluate these arguments. Can you give an explanation consistent with rational behavior?
- University of Chicago · Ph.D. Examination in Economic Theory · Jacob Viner, 1928
Discuss the scope and method of the English classical school in the light of modern criticism therof.
- University of Chicago · Ph.D. Examination in Economic Theory · Jacob Viner, 1928
Explain, and discuss the validity, purpose, and usefulness of any three of the following Marshallian concepts:
- University of Chicago · Ph.D. Examination in Economic Theory · Jacob Viner, 1928
Describe the cost and supply aspects of the long-run equilibrium conditions under competition for two joint-products, when the proportions in which the two products are produced are: (a) non-variable, (b) variable.
- University of Chicago · Ph.D. Examination in Economic Theory · Jacob Viner, 1928
Discuss the contributions to economics of any five of the following:(a) Aristotle; (b) Cantillon ; (c) David Hume; (d) Cournot; (e) Senior; (f) J. B. Say; (g) Von Thunen; (h) Leon Walras.
- University of Chicago · Ph.D. Examination in Economic Theory · Jacob Viner, 1928
What is the significance of margins in price theory.
- University of Chicago · Ph.D. Examination in Economic Theory · Jacob Viner, 1928
“The price-processes of the market-place are a product of the institutional framework, and cannot be explained independently of the long evolution of the institutional framework of modern economic society which has molded them” Discuss.
- University of Chicago · Ph.D. Examination in Economic Theory · Jacob Viner, 1928
In what respects did the Canonists carry economic inquiry beyond its previous status?
- University of Chicago · Ph.D. Examination in Economic Theory · Jacob Viner, 1928
Discuss the problem of the relationship of the rate of physical productivity of capital goods to the rate of interest; or
- University of Chicago · Ph.D. Examination in Economic Theory · Jacob Viner, 1928
Compare the wage theories of Adam Smith, Ricardo, and John Stuart Mill.
- University of Chicago · Ph.D. Examination in Economic Theory · Jacob Viner, 1928
Outline a research project for either:
- University of Chicago · Economics 301 (Economics 300 second graduate price theory course) · Zvi Griliches, 1965
Answer whether the statement is true, false, or uncertain. In each case, write a few sentences explaining your answer. Your grade will depend heavily on your explanation.
- University of Chicago · Economics 301 (Economics 300 second graduate price theory course) · Zvi Griliches, 1965
A. The demand function for a product is P = 115 — Q. The total cost of producing Q units in one plant is given by TC = 400 — 100Q^{2} + Q^{3}. Only one-plant firms are allowed.
- University of Chicago · Economics 301 (Economics 300 second graduate price theory course) · Zvi Griliches, 1965
Answer each question “true”, “false”, or “uncertain”, and explain your answer briefly. Your grade will depend heavily on your explanation.
- University of Chicago · Economics 301 (Economics 300 second graduate price theory course) · Zvi Griliches, 1965
Each firm in an industry is given a license to operate and no new firms are allowed to enter. The value of a license rises over time. Does this prove that firms operate subject to diseconomies of scale?
- University of Chicago · Economics 301 (Economics 300 second graduate price theory course) · Zvi Griliches, 1965
It is often asserted that Americans love money more than Englishmen (or Europeans, or Latin Americans). Can you think of a way to test this proposition?
- University of Chicago · Economics 301 · L. Telser, 1965
Answer the following questions, true, false or uncertain and briefly defend your answer.
- University of Chicago · Economics 301 · L. Telser, 1965
If the supply schedule of an industry is perfectly elastic then the production function for the industry is characterized by constant returns to scale.
- University of Chicago · Economics 301 · L. Telser, 1965
A monopoly can never have a larger output and lower price than a competitive industry assuming that cost conditions would be the same for both.
- University of Chicago · Economics 301 · L. Telser, 1965
No one would resort to the cultivation of inferior lands if he did not run into diminishing marginal returns on fertile land. Since inferior lands are in cultivation, diminishing returns must be present.
- University of Chicago · Economics 301 · L. Telser, 1965
If there are empty seats on a train then marginal cost pricing requires that new passengers should ride free.
- University of Chicago · Economics 301 · L. Telser, 1965
The margin in stock trading is the fraction of the price of the stock which the trader must supply and the balance is lent to the trader by the broker. Hence the margin represents the trader’s equity and is analogous to a down payment. Assume there is no government regulation of the margin and that brokers are free to set any margin they please and to charge any interest rate they please on the loan they extend to traders. Assume there is perfect competition in the brokerage industry.
- University of Chicago · Economics 301 · L. Telser, 1965
In the theory of the household demand for perishable goods, for a given money income there is a fall in real income if the price of some good rises. The pure substitution effect is the effect on quantity demanded of a price change for constant real income. In the case of durables households own stocks of durables. Hence a rise in the price of durables causes the value of the stock of consumer owned durables to appreciate. Hence a price rise of perishable reduces the demand for perishables if money income is given and the income elasticity is positive while a price rise of durables increases the demand because it implies a rise in consumer wealth if the wealth elasticity of demand is positive.
- University of Chicago · Economics 301 · M. Friedman, 1964
I. Indicate whether each of the following statements is true (T), false (F), or uncertain (U) and state briefly (on this paper) the reason for your answer.
- University of Chicago · Economics 301 · M. Friedman, 1964
II. Fill in the blanks in the following questions.
- University of Chicago · Economics 301 · M. Friedman, 1964
III. Find the mistakes (there are at least six) in the accompanying diagram showing long run and short run marginal and average cost curves for an individual firm, and explain the general principle corresponding to each particular mistake.
- University of Chicago · Economics 301 · M. Friedman, 1964
IV. Consider two alternative taxes imposed on a commodity: (a) a specific tax of T dollars per unit sold: (b) an ad valorem tax of t per cent of the price of the product.
- University of Chicago · Economics 301 · M. Friedman, 1964
V. When someone offers a cigarette to pipe-puffing Surgeon General Luther Terry, he always grabs it. “Every one I accept I tear up,” he says. “That way there’s one less cigarette.” (Time, February 7, 1964).
- University of Chicago · Economics 301 · M. Friedman, 1964
PROBLEM
- University of Chicago · Economics 301 · 1960
I. Indicate which alternatives, if any, are correct or fill in the indicated blanks. Where you think it required, briefly justify your answer.
- University of Chicago · Economics 301 · 1960
II. Translate the following quotations into economics and discuss:
- University of Chicago · Economics 301 · 1960
III. A consumer in a three commodity market buys the following quantities at the following prices:
- University of Chicago · Economics 301 · 1960
IV. State briefly what seem to you the central features of Chamberlin's analysis of monopolistic competition and Stigler's criticism of the analysis.
- University of Chicago · Economics 300 · G. Hanoch, 1964
Answer the following True, False, or Uncertain. Explain your answer briefly.
- University of Chicago · Economics 300 · G. Hanoch, 1964
Two consumers, A and B, have equal and stable tastes and incomes. In December, each spent his entire monthly income on x units of X and y units of Y, when the prices in the market were $2.00 for X and $5 for Y. Consumer A accepted an offer of his employer to be paid in kind, by receiving the same quantities y and y every month directly. (He could still exchange any quantity of X and Y at the market, for the current market prices). B’s money income remained the same.
- University of Chicago · Economics 300 · G. Hanoch, 1964
Mark the following True, False, or Uncertain. Explain your answers very briefly.
- University of Chicago · Economics 300 · G. Hanoch, 1964
A monopolist is faced with the following stable demand schedule for his patented machines:
- University of Chicago · Economics 300 · G. Hanoch, 1964
The current charge for telephone service in city C is $6.40 per month, allowing the consumer 80 free local calls every month, Each additional call costs five cents. Installation is free, and no long-distance calls are available.
- University of Chicago · Economics 300A · Arnold Harberger, 1957
True, False, or Uncertain. In each case write a paragraph explaining your answer. Your grade will depend heavily on your explanation.
- University of Chicago · Economics 300A · Arnold Harberger, 1957
Derive the expression for the elasticity of demand facing a particular producer in terms of the elasticity of “total demand” in the market and of the elasticity of “other supply”.
- University of Chicago · Economics 300A · Arnold Harberger, 1957
Using indifference curves, derive the supply curve of labor as A function of real wages. Distinguish between the “income effect” and the substitution effect. State what, if any, will be the circumstances under which a rise in real wages will lead to a reduction in the quantity of labor offers.
- University of Chicago · Economics 300A · Arnold Harberger, 1957
True, False or Uncertain. In each case write a few sentences explaining your answer.
- University of Chicago · Economics 300A · Arnold Harberger, 1957
Discuss and comment on Marshall’s four rules of derived demand
- University of Chicago · Economics 300A · Arnold Harberger, 1957
Discuss the relationship between short run and long run cost curves. Is a shorter run marginal cost curve always more elastic than a longer run marginal cost curve going through the same point on the long run average cost curve
- University of Chicago · Economics 300A · Arnold Harberger, 1957
True, False, or Uncertain. In each case write a few sentences explaining your answer. Your grade will depend heavily on your explanation.
- University of Chicago · Economics 300A · Arnold Harberger, 1957
Outline the economics of the fishing industry. What resemblance, if any, do you see between the economics of the fishing industry under conditions of competition and the economics of monopolistic competition.
- University of Chicago · Economics 300A · Arnold Harberger, 1957
Indicate, using supply and demand diagrams, what is the welfare cost of a tariff. Assume that the tariff is on a product (woolen cloth) in which the domestic demand is partly met by domestic supplies and partly met by imports. The tariff, of course, is a tax only on the imports. Assume that the imported product and the domestic product are for all relevant purposes homogeneous. What role does the elasticity of domestic demand for woolen cloth play in your measure of welfare cost? The elasticity of domestic supply of woolen cloth? The ratio of domestic supply to domestic demand?
- University of Chicago · Economics 300 · Albert Rees, 1960
State whether each of the following statements about the U. S. economy is true, false, or uncertain, and explain your answers briefly.
- University of Chicago · Economics 300 · Albert Rees, 1960
Comment briefly on the following statement:
- University of Chicago · Economics 300 · Albert Rees, 1960
Increased costs cause manufacturers to reduce the size of 5 cent chocolate bars from 2-1/2 ounces to 2 ounces. Because the bars are smaller, people eat more of them and consumption rises from 10, 000 bars a week to 11,000.
- University of Chicago · Economics 300 · Albert Rees, 1960
The following table gives hypothetical prices of pork and beef per pound in two years, and quantities consumed in a certain town.
- University of Chicago · Economics 300 · Albert Rees, 1960
Jones lives in a rented house for which he pays $150 a month. He has the opportunity of buying an identical house for $25,000, of which $15,000 will be paid in cash and $10,000 can be borrowed on a mortgage. He has figured that his monthly expenses would be $100 if he bought: $50 for interest on the mortgage, $20 for local taxes, and $30 for maintenance and depreciation. His income tax and expenses for fuel and utilities will not be affected by the purchase. He argues that it will cost him less to live if he buy the house; his wife argues that it will not.
- University of Chicago · Economics 300 · Albert Rees, 1960
The GJS corporation, manufacturers of gadgets, have determined that for every 10 per cent increase in the capacity of a gadget factory, minimum short-run average total cost falls by 1 per cent throughout the relevant range of capacities.
- University of Chicago · Economics 300 · Albert Rees, 1960
Show each of the following events on an indifference map:
- University of Chicago · Economics 300 · Albert Rees, 1960
In the United States, about one-fifth to one-fourth of all income is property income. State briefly (a) the advantages of having private income from property in our economy (b) the costs or disadvantages. You may judge these according to any values you care to use, making the values as explicit as possible.
- University of Chicago · Economics 300 · Albert Rees, 1960
In a certain isolated area there are 50 farms of each of two types, A farms and B farms (100 farms in all). Within each type, all farms are identical. All farms are worked by identical workers. The marginal product schedules of one farm of each type are given below, in bushels of wheat per year.
- University of Chicago · Economics 300 · Albert Rees, 1960
By means of appropriate diagrams and/or explanations, show the short-run effect of each of the following taxes on the output and profits of a monopolist.
- University of Chicago · Economics 300 · Albert Rees, 1960
The Edgeworth Box Company is the only employer in the town of Yarmouth. Its supply schedule of labor is given by , where is the wage in cents per hour and is the number of manhours supplied per week. The company sells boxes in a competitive market. The value of the marginal product of labor is given by
- University of Chicago · Price Theory (Econ 331) · 1969
A recent survey found that supermarkets in low income areas charge higher average prices than supermarkets in high income areas for many identical items. This is consistent with
- University of Chicago · Price Theory (Econ 331) · 1969
On the following questions, indicate whether True (T), False (F), or Uncertain (U), with brief explanation.
- University of Chicago · Price Theory (Econ 331) · 1969
Consider a price system involving four commodities, , , , and . If the goods are gross substitutes, it can be shown that the equilibrium will
- University of Chicago · Price Theory (Econ 331) · 1969
If the consumer’s utility function is separable, then his marginal utility must be declining for all goods.
- University of Chicago · Price Theory (Econ 331) · 1969
In a two good world, consumer indifference curves must be everywhere convex to the origin. Otherwise there is no solution to the consumer’s problem of maximizing his satisfaction subject to his budget constraint.
- University of Chicago · Price Theory (Econ 331) · 1969
Three top executives leave company A and join company B. The price of company A’s stock falls and the price of company B’s stock rises. This proves that the executives are being exploited.
- University of Chicago · Price Theory (Econ 331) · 1969
In Ronald Coase’s celebrated article on the nature of social cost the first example concerns the externality imposed by a cattle ranch that is next to a corn farm. The cattle can wander into the corn farm and eat some of the corn. This increases cost to the corn farmer and imposes an externality on him. Construct a formal analysis of the following situation:
- University of Chicago · Price Theory (Econ 331) · 1969
Consider an economy with two, L and K, factors of production producing goods, X and Y, under conditions of constant returns to scale. Assume that X is relatively L-intensive at all factor prices.
- University of Chicago · Price Theory (Econ 331) · 1969
What effect would you expect the British devaluation of the pound from $2.80 to $2.40 to have had on the dollar price of Rolls Royce cars? Justify your conclusion, preferably by diagrams describing the position of the company, indicating explicitly any assumptions you regard as relevant. Assume that wage rates in Britain in pounds are not affected by the devaluation.
- University of Chicago · Price Theory (Econ 331) · 1969
The difference between the price of foreign crude oil and the price of domestic crude oil (landed at the same U.S. port) times the quantity of oil consumed in the U.S. is roughly $5 billion. This has been cited as an estimate of the cost to the U.S., in terms of wasted resources, of the whole set of governmental measures special to oil (oil import quotas, percentage depletion allowances, prorationing of oil, etc.). Indicate as specifically as you can the defects, if any, in this measure, and the information needed to set a dollar value on each defect.
- University of Chicago · Economic Theory (Ph.D./A.M. Preliminary Examination) · Lloyd Metzler (chair), Milton Friedman, Frank Knight, 1951
Discuss the probable shape of the long-run cost curve for an industry operating under approximately perfect competition. How would it differ in the short run, i.e., in response to an unanticipated shift in the demand-curve for the product, assumed not to be permanent?
- University of Chicago · Economic Theory (Ph.D./A.M. Preliminary Examination) · Lloyd Metzler (chair), Milton Friedman, Frank Knight, 1951
Briefly discuss the Ricardian conception of capital, specifically in relation to his theory of wages. Argue the question whether wages are paid out of (pre-existing) capital or out of (current) product.
- University of Chicago · Economic Theory (Ph.D./A.M. Preliminary Examination) · Lloyd Metzler (chair), Milton Friedman, Frank Knight, 1951
Can you find any relation between the Böhm-Bawerk production-period theory of interest and the Ricardian theory of capital and profit? What is the crucial assumption about the nature and source of capital which underlies the production-period theory, and is it sound? How does diminishing returns to investment enter into Ricardo’s and Böhm-Bawerk’s theories?
- University of Chicago · Economic Theory (Ph.D./A.M. Preliminary Examination) · Lloyd Metzler (chair), Milton Friedman, Frank Knight, 1951
Consider a trade union that is strong enough to prevent nonmembers from working at the trade in question and whose membership, for simplicity, will be supposed unaffected by the level of returns to members within broad limits (e.g., future membership consists of present membership minus members who die plus male children of present members). Analyze what its position would be toward the immigration of unskilled labor if it took account solely of the effect of such immigration on the incomes of its members. What considerations, if any, should lead it to favor more extensive immigration? What considerations, if any, to favor restriction on immigration? Is there a clear balance in favor of the one position or the other?
- University of Chicago · Economic Theory (Ph.D./A.M. Preliminary Examination) · Lloyd Metzler (chair), Milton Friedman, Frank Knight, 1951
“The orthodox tools of supply and demand assume that sellers and buyers are free to buy or sell any quantities they wish at the price determined by the market. This assumption cannot validly be made when price controls or rations are imposed by government. It follows that these tools are useless in analyzing the effects of such governmental actions. Economists should free themselves from slavish adherence to outmoded concepts and fashion new tools for the new problems raised by the modern Leviathan.” Discuss.
- University of Chicago · Economic Theory (Ph.D./A.M. Preliminary Examination) · Lloyd Metzler (chair), Milton Friedman, Frank Knight, 1951
The following figures represent the prices and quantities of two commodities, A and B, consumed by three individuals having the incomes stated in two different periods of time.
- University of Chicago · Economic Theory (Ph.D./A.M. Preliminary Examination) · Lloyd Metzler (chair), Milton Friedman, Frank Knight, 1951
(a) Describe and discuss briefly the circumstances that gave rise to the establishment of the Federal Reserve System and the major events (including its actions) in its history.
- University of Chicago · Economic Theory (Ph.D./A.M. Preliminary Examination) · Lloyd Metzler (chair), Milton Friedman, Frank Knight, 1951
“From the preceding considerations it would be seen, even if it were not otherwise evident, how great an error it is to imagine that the rate of interest bears any necessary relation to the quantity or value of the money in circulation. An increase in the currency has in itself no effect, and is incapable of having any effect, on the rate of interest.” (J.S. Mill)
- University of Chicago · Economic Theory (Ph.D./A.M. Preliminary Examination) · Lloyd Metzler (chair), Milton Friedman, Frank Knight, 1951
What measures would you advocate—and give your reasons for inclusion and omission—for controlling the inflationary tendency in the U.S. under present conditions?
- University of Chicago · Price Theory (Core Examination) · 1964
Indicate whether each of the following statements is true or false and explain briefly why.
- University of Chicago · Price Theory (Core Examination) · 1964
A substitute for a product is invented. What, if anything, can you say about the effect of this invention on (a) the position; (b) the elasticity of the demand curve for the initial product? (To fix ideas, one example is the effect of the invention of electric shavers on the demand for safety razors; another, and perhaps more widely quoted example, is the effect of the introduction of financial intermediaries on the demand for money.)
- University of Chicago · Price Theory (Core Examination) · 1964
We frequently hear it said that labor is cheap and capital dear in a country like the U.S. Such statements seem reasonable, yet it is not clear how one can compare the price of labor (rupees or dollars per hour) with the price of capital (percent per year). Can you suggest a way to interpret the statements so that they make sense?
- University of Chicago · Price Theory (Core Examination) · 1964
In the 1880’s there were a class of independent railroad ticket brokers called “scalpers,” who purchased tickets in quantity at reduced prices from the railroads and resold them to the public, typically at prices below the prices posted by the railroads and charged to people who bought tickets at the railroad windows.
- University of Chicago · Price Theory (Core Examination) · 1964
President Johnson has recently sent to Congress a bill that would require certain industries to pay double the standard wage-rate for overtime. Assuming competitive conditions, what can you say about the effect on (a) prices of products (b) output (c) number of man hours, (d) number of persons employed in (1) the industries affected and (2) other industries?
- University of Chicago · Price Theory (Core Examination) · 1964
Currently, the number of taxicabs permitted to operate in the city of Chicago is limited by licensure, no new licenses are being issued, and existing licenses which can be transferred sell for substantial sums. In addition, the price which taxicabs charge is fixed by the city. (A) Suppose restrictions on licensure were lifted but prices continued to be fixed at present levels. What would be the effect on (a) number of cabs, (b) incomes of non-driving owners of cabs, (c) wages of non-owning (i.e., hired) cab drivers?
- University of Chicago · Industrial Organization Prelim · 1977
It is sometimes alleged that periods of economic depression are more conducive to the growth of economic regulation than prosperity. Develop a theory which elaborates the link between the level of economic activity and the propensity to regulate. Include a discussion of whether the goals of regulatory agencies (old as well as new) are likely to differ with the level of economic activity.
- University of Chicago · Industrial Organization Prelim · 1977
Sales of some firms are occurring at prices below average variable cost. Suppose there were no legal restrictions on merger. Under what conditions, if any, would the firms in the industry prefer merger as a means of reducing industry output?
- University of Chicago · Industrial Organization Prelim · 1977
A recent treatise on antitrust law lists the following as among the factors favorable to collusion in an industry.
- University of Chicago · Industrial Organization Prelim · 1977
What problems for profit maximizing collusion among the firms in the book publishing industry would arise because of each of the following conditions:
- University of Chicago · Industrial Organization Prelim · 1977
How do you explain the following empirical findings for manufacturing industries?
- University of Chicago · Industrial Organization Prelim · 1977
There has recently been renewed interest in the social optimality of various devices for the public regulation of pollution. Among popular proposals to deal with the problem: emission taxes, subsidies for pollution control, transferable rights to emit pollutants, maximum limits on pollution discharges from each source. Assume that the optimality conditions for public regulation have been met. Evaluate the relative efficiency of these four devices and any others you wish to add to the list.
- University of Chicago · Economics 301 — Price and Distribution Theory · Jacob Viner, 1941
Comment briefly on each of the following passages (explanation, justification, disproof, qualification, as may be appropriate).
- University of Chicago · Economics 301 — Price and Distribution Theory · Jacob Viner, 1941
a. If elasticity of demand is unity, and original rate of sales is 1,000 per month, what will happen to the rate of sales if price falls 50 per cent?
- University of Chicago · Economics 301 — Price and Distribution Theory · Jacob Viner, 1941
Discuss the probable shapes for a particular plant of its short-run and its long-run average cost curves, and given these curves, explain the derivation of the corresponding marginal cost curves.
- University of Chicago · Economics 301 — Price and Distribution Theory · Jacob Viner, 1941
On what grounds can it be held that in any important industry, increase in output is in the static long-run likely to be subject to conditions of increasing cost? Give and discuss the arguments which have been presented in support of different views.
- University of Chicago · Economics 301 — Price and Distribution Theory · Jacob Viner, 1941
Suppose that a single monopolist takes charge of an industry which has hitherto been in the hands of a large number of independent producers and which makes extensive use of a specialized type of labor. Give an account of the factors which will determine the effect of the change on (a) the industry’s output, and (b) the volume of employment of labor by the industry.
- University of Chicago · Economics 301 — Price and Distribution Theory · Jacob Viner, 1941
A power monopoly, operating within the range where there are net internal economies of large-scale production sells current for both industrial and domestic use. The distribution costs on the latter are 20 cents per unit higher than for the former. Given: (a) the industrial demand schedule for current; (b) the domestic demand schedule for current; (c) the average cost schedule for generating current plus distributing it to industrial users.
- University of Chicago · Economics 301 — Price and Distribution Theory · Jacob Viner, 1941
a. What conditions are necessary if the demand curves for particular firms in an industry are to have negative inclinations, but without any net monopoly profits?
- University of Chicago · Economic Theory · 1956
I. (140 points) True, False, or Uncertain. Explain your answer in each case. Your score will depend heavily on your explanations.
- University of Chicago · Economic Theory · 1956
If a commodity has a negative income elasticity, the function relating price and quantity consumed may have a positive slope.
- University of Chicago · Economic Theory · 1956
If two goods are substitutes in consumption, a fall in the price of one will always result in a fall in the price of the other.
- University of Chicago · Economic Theory · 1956
A demand schedule for labor shows the amount of labor in physical units that will be taken at each wage. A demand schedule for capital shows the amount of capital in physical units that will be taken at each interest rate.
- University of Chicago · Economic Theory · 1956
For a single consumer, the sum of the income elasticities of demand for all commodities is unity, while the sum of their price elasticities is zero.
- University of Chicago · Economic Theory · 1956
An excise tax affects the allocation of resources among different uses, whereas an income tax does not.
- University of Chicago · Economic Theory · 1956
The competitive firm attempts to equalize price, marginal cost and average cost.
- University of Chicago · Economic Theory · 1956
The marginal cost of producing a commodity is equal to the price of any one factor divided by its marginal physical product, even though many factors are used in producing the commodity.
- University of Chicago · Economic Theory · 1956
An effective price ceiling on cotton, i.e., one that holds its price below the free market level, will decrease the market price of textiles.
- University of Chicago · Economic Theory · 1956
A subsidy of a fixed number of dollars per unit of output might be used as part of a program to control a monopoly in the public interest.
- University of Chicago · Economic Theory · 1956
If the “true cost of living” for a consumer is interpreted to mean the cost of staying on a given indifference surface, then upper and lower limits for the change in a consumer’s true cost of living between period 0 and period 1 are given respectively by the Laspeyres and Paasche indexes using the consumer’s own purchases as weights.
- University of Chicago · Economic Theory · 1956
The supply curve for the output of a monopolist is inelastic at the point of maximum monopoly profit.
- University of Chicago · Economic Theory · 1956
Resources are seriously misallocated in the broadcasting industry in the U.S., through the fact that the cost of broadcasts is borne by advertisers rather than by listeners and viewers directly.
- University of Chicago · Economic Theory · 1956
The rate of interest in a stationary state would be zero.
- University of Chicago · Economic Theory · 1956
It is a convention in economics to draw consumption indifference curves convex to the origin, but we have no way of knowing whether they really are.
- University of Chicago · Economic Theory · 1956
Assume that if the prices of farm products fall farmers will expend more effort in an attempt to maintain their income. Under these circumstances, a reduction in effective farm price supports will increase the volume of farm surpluses.
- University of Chicago · Economic Theory · 1956
If a worker’s utility function in the two dimensions, (1) leisure and (2) all other goods and services, is homogeneous of first degree, then his supply curve of labor will be backward sloping.
- University of Chicago · Economic Theory · 1956
If it takes one day to catch a beaver and two to catch a deer, one deer will exchange for two beavers.
- University of Chicago · Economic Theory · 1956
Almost all railroads are reported to have gross revenues from dining car service that are less than the direct expenses of providing the service. In their own interest the railroads should increase the price of dining car meals.
- University of Chicago · Economic Theory · 1956
Because of the facts stated in number 19, the railroads should discontinue dining car service.
- University of Chicago · Economic Theory · 1956
The elasticity of a linear supply function that passes through the origin is always unity.
- University of Chicago · Economic Theory · 1956
The price of haircuts in Chicago is approximately 40 per cent higher than in New York; therefore, average earnings of barbers in Chicago are higher than in New York.
- University of Chicago · Economic Theory · 1956
Take it as a fact that grade one cocoa commands a premium on world markets over inferior grades; that the Nigerian Cocoa Marketing Board (which is the sole purchaser from producers) has set a differential between grades in prices paid to producers wider than the world market differential; and that they have succeeded in this way in raising sharply the proportion of Nigerian production which is grade one. By so doing, they have greatly improved the efficiency of the Nigerian economy.
- University of Chicago · Economic Theory · 1956
II. (60 points)
- University of Chicago · Economic Theory · 1956
III. (40 points)
- University of Chicago · Economic Theory Preliminary Examination · Milton Friedman, 1952
Define the following terms precisely and indicate briefly the use made of each in economics:
- University of Chicago · Economic Theory Preliminary Examination · Milton Friedman, 1952
(a) “I wouldn’t take it if you paid me”. Draw the consumption indifference curves implied by this statement. (You may find it helpful to suppose first that there is some finite minimum price per unit at which the speaker would take “it”; then approach the limit implied by the quotation.)
- University of Chicago · Economic Theory Preliminary Examination · Milton Friedman, 1952
(a) Complaints are often heard about the “high” incomes of bootleggers in dry states, or gamblers where gambling is illegal, or smugglers, etc. Are high incomes in such cases evidence of the success or the failure of the laws? Explain your answer.
- University of Chicago · Economic Theory Preliminary Examination · Milton Friedman, 1952
(a) Outline the theory of joint supply
- University of Chicago · Economic Theory Preliminary Examination · Milton Friedman, 1952
During every hyper-inflation there are always recurrent complaints of a “shortage of money.” How do you explain this phenomenon?
- University of Chicago · Economic Theory Preliminary Examination · Milton Friedman, 1952
The following quotation is from an article on the illicit gold traffic:
- University of Chicago · Economic Theory Preliminary Examination · Milton Friedman, 1952
There has been much talk of the so-called “wage-price spiral.” What is generally meant by this term? Give a theoretical analysis of the so-called spiral, indicating under what circumstances you think it could or could not arise.
- University of Chicago · Economic Theory Preliminary Examination · Milton Friedman, 1952
Define the following terms precisely and indicate briefly the use made of each in economics:
- University of Chicago · Economic Theory Preliminary Examination · Milton Friedman, 1952
(a) Outline the theory of joint supply
- University of Chicago · Economic Theory Preliminary Examination · Milton Friedman, 1952
Assume that Crusoe is interested in economizing the use of his resources and that during the period in question there is no change in his knowledge of production techniques. How does capital and interest theory aid in explaining the following observations?
- University of Chicago · Economic Theory Preliminary Examination · Milton Friedman, 1952
What theories do you offer to explain the following phenomena?
- University of Chicago · Economic Theory Preliminary Examination · Milton Friedman, 1952
Using diagrams, briefly discuss the long-run cost curve for a competitive industry. Indicate, with diagrams, the response to be expected from (a) an expansion of demand, (b) a decrease of demand, within periods too short for a significant change in the fixed investment.
- University of Chicago · Economic Theory Preliminary Examination · Milton Friedman, 1952
Briefly state the main changes in the body of accepted price theory at the turn from “classical” to “Austrian” (the subjective-value school), i.e., at the “revolution” of the 1870’s. Similarly describe the transition from Austrian to “New-classical” (Marshallian) doctrine.
- University of Chicago · Economic Theory Preliminary Examination · Milton Friedman, 1952
During every hyper-inflation there are recurrent complaints of a “shortage of money.” How do you explain this phenomenon? Compare the situation during acute depression.
- University of Chicago · Economic Theory Preliminary Examination · Milton Friedman, 1952
A part of the nation’s productive capacity is destroyed, say by a war. Ignoring any possible expectational and distributive effects, how will this affect: (a) the division of the national income between consumption and investment? and (b) the income-velocity of money. How, if at all, does your answer depend on whether wealth is a variable which influences behavior?
- University of Chicago · Economic Theory Preliminary Examination · Milton Friedman, 1952
There has been much talk of the so-called “wage-price spiral.” What is generally meant by this term? Give a theoretical analysis of the so-called spiral, indicating under what circumstances you think it would or would not arise.
- University of Chicago · Economic Theory Preliminary Examination for the Ph.D. and A.M. Degrees · 1958
Develop the major aspects of the theory of a competitive firm, and compare it with the theory of consumer behavior. What are the similarities and the differences between the two theories and the concepts used in each?
- University of Chicago · Economic Theory Preliminary Examination for the Ph.D. and A.M. Degrees · 1958
Analyze briefly each of the following propositions: Marginal productivity analysis…
- University of Chicago · Economic Theory Preliminary Examination for the Ph.D. and A.M. Degrees · 1958
Indicate briefly the meaning of each of the following phrases, identify the economist (or economists) associated with each, and state some of his major contributions to economics:
- University of Chicago · Economic Theory Preliminary Examination for the Ph.D. and A.M. Degrees · 1958
In calculating whether the government ought to undertake certain investment projects, a rate of interest is frequently used. How in principle would you determine what rate of interest is appropriate?
- University of Chicago · Economic Theory Preliminary Examination for the Ph.D. and A.M. Degrees · 1958
It is argued in connection with the development of underdeveloped countries that basic industries such as steel should be developed by the government, since private investors will neglect the external economies brought to other industries by low-cost steel, and therefore will underinvest. Evaluate this argument. For what general class or classes of cases is the argument correct?
- University of Chicago · Economic Theory (Core/Preliminary Examination) · 1961
(1 hour) Answer each question “true” or “false” and explain your answer very briefly.
- University of Chicago · Economic Theory (Core/Preliminary Examination) · 1961
(40 minutes)
- University of Chicago · Economic Theory (Core/Preliminary Examination) · 1961
III. (40 minutes)
- University of Chicago · Economic Theory (Core/Preliminary Examination) · 1961
IV. (40 minutes)
- University of Chicago · Price Theory (Preliminary/Core Examination) · 1963
(60 points) Indicate whether you believe each of the following statements to be true, false, or uncertain. In each case write a few sentences explaining your answer. Your grade will depend heavily on your explanation.
- University of Chicago · Price Theory (Preliminary/Core Examination) · 1963
(15 points) The University City Art Theater, a motion picture house showing foreign films, has the following price policies: The basic admission price is $1.00 for evening performances and 60 cents in the afternoon. Registered university students are admitted at half price at all times. A member of the University’s economics department has complained that the theater is a discriminating monopolist and should be required by local ordinance to follow a one-price policy. Comment on the desirability of this recommendation.
- University of Chicago · Price Theory (Preliminary/Core Examination) · 1963
(25 points)
- University of Chicago · Economics 301. Price and Distribution Theory · Jacob Viner, 1935
Discuss the relationship of marginal cost to prices:
- University of Chicago · Economics 301. Price and Distribution Theory · Jacob Viner, 1935
In order that an industry shall operate at constant costs as its output is varied, what conditions must hold as to:
- University of Chicago · Economics 301. Price and Distribution Theory · Jacob Viner, 1935
Comment briefly on the following statements:
- University of Chicago · Economics 301 [Price Theory B] · Milton Friedman, 1959
The accompanying graph gives a set of consumption indifference curves for two commodities or services each of which for some range of quantities and in combination with some amounts of the other is capable of being either a “good” or a “bad” (a “product” or a “factor”) like books and bookshelves, or cutting the grass and playing the piano (either of which may be “labor” or “play”). Of the curves drawn, corresponds to the lowest level of utility. Answer this question on this paper, wherever relevant filling in the blanks.
- University of Chicago · Economics 301 [Price Theory B] · Milton Friedman, 1959
Find the mistakes (there are at least six) in the accompanying diagram showing long and short run marginal and average cost curves, and explain the general principle corresponding to each particular mistake.
- University of Chicago · Economics 301 [Price Theory B] · Milton Friedman, 1959
Define briefly the following terms:
- University of Chicago · Economics 301 [Price Theory B] · Milton Friedman, 1959
Discuss the following quotations:
- University of Chicago · Economic Theory (Old Rules) · 1961
Indicate whether statement is true, false, or uncertain, and briefly give your reason.
- University of Chicago · Economic Theory (Old Rules) · 1961
A. A drug manufacturer stated that the prices of drugs sold in England were priced at about one half the price of similar drugs in the United States. The reason given for the price difference was that per capita incomes were much lower in England than in the United States and the English could not afford to pay as much for the drugs.
- University of Chicago · Economic Theory (Old Rules) · 1961
A. In the effect of union-produced wage increases on prices, one economist says,
- University of Chicago · Economic Theory (Old Rules) · 1961
Discuss the relation between forward (and/or futures) prices and spot prices on commodity markets and foreign exchange markets and the role of “speculators” and “hedgers” in these markets. State some of the leading theories about this relationship and discuss the kinds of evidence used in testing them.
- University of Chicago · Price Theory (Core/Preliminary Examination) · 1962
(60 minutes) True-False. State very briefly the reason for your answer to each question.
- University of Chicago · Price Theory (Core/Preliminary Examination) · 1962
(30 minutes) The stock market break of May 28 elicited many explanations. Comment upon the relevance of each of the following explanations.
- University of Chicago · Price Theory (Core/Preliminary Examination) · 1962
(30 minutes) Capital formation may be defined as the use of current resources in such a way as to increase future income, and on this definition capital formation includes investments in equipment, human beings, and discovery of new knowledge. Discuss the problem of the meaning of the marginal product of capital, and whether capital as defined is subject to diminishing returns.
- University of Chicago · Price Theory (Core/Preliminary Examination) · 1962
(20 minutes) Each firm in an industry is given a license to operate, and no new firms are allowed to enter. The value of a license rises over time — does this prove that firms operate subject to diseconomies of scale?
- University of Chicago · Price Theory (Core/Preliminary Examination) · 1962
(40 minutes) It appears that the Federal Communications Commission will be given the power to compel manufacturers of television sets to build them in such a way that they will receive ultra-high frequency broadcasts (at an additional cost of about $25 per set). Then every community can have (say) a dozen channels. Will consumers be benefitted?
- University of Chicago · Price Theory (Core Examination, Preliminary Examination for the Ph.D. and A.M. Degrees) · 1965
Indicate whether you believe each of the following statements to be true, false, or uncertain. In each case write a few sentences explaining your answer. Your grade will depend heavily on your explanation.
- University of Chicago · Price Theory (Core Examination, Preliminary Examination for the Ph.D. and A.M. Degrees) · 1965
A flat sum tax on the firms in an industry will never have an effect upon output in the short-run.
- University of Chicago · Price Theory (Core Examination, Preliminary Examination for the Ph.D. and A.M. Degrees) · 1965
If a demand curve is defined as the relationship between price and quantity of X, the real income and the prices and quantities of other goods held constant, it will have an elasticity of -1.
- University of Chicago · Price Theory (Core Examination, Preliminary Examination for the Ph.D. and A.M. Degrees) · 1965
If a cartel assigns quotas to its member firms on the basis of their “capacity” there will be more than the profit-maximizing amount of investment in the industry.
- University of Chicago · Price Theory (Core Examination, Preliminary Examination for the Ph.D. and A.M. Degrees) · 1965
If all commodities had positive income elasticities, there would be no merit in the present distinction between substitution and income effects.
- University of Chicago · Price Theory (Core Examination, Preliminary Examination for the Ph.D. and A.M. Degrees) · 1965
The elasticity of demand for X with respect to the price of Y never equals the elasticity of demand of Y with respect to the price of X.
- University of Chicago · Price Theory (Core Examination, Preliminary Examination for the Ph.D. and A.M. Degrees) · 1965
The short-run price elasticity of the supply of beef can be negative.
- University of Chicago · Price Theory (Core Examination, Preliminary Examination for the Ph.D. and A.M. Degrees) · 1965
The assumptions of competition, constant returns to scale, and equilibrium are inconsistent.
- University of Chicago · Price Theory (Core Examination, Preliminary Examination for the Ph.D. and A.M. Degrees) · 1965
A competitive firm will increase its output as a result of a fall in the price of one of its inputs.
- University of Chicago · Price Theory (Core Examination, Preliminary Examination for the Ph.D. and A.M. Degrees) · 1965
The own-price elasticity of demand for a commodity is no smaller, in absolute value, than the marginal propensity to consume that commodity.
- University of Chicago · Price Theory (Core Examination, Preliminary Examination for the Ph.D. and A.M. Degrees) · 1965
“The price paid for water is no indication of its true value in use because the water makes the production of additional wealth possible. Thus a farmer may pay his irrigation district $8.00 for water per acre of land, but the value of the crops grown might be in the neighborhood of $100 per acre.”
- University of Chicago · Price Theory (Core Examination, Preliminary Examination for the Ph.D. and A.M. Degrees) · 1965
“A central planning authority may or may not decide to weight equally the welfare of the future generation and the welfare of the present generation. This is essentially an ethical question. But if equal weights are to be applied, the appropriate rate of discount (interest) to use in comparing the costs and benefits from alternative public investments is a zero rate.”
- University of Chicago · Price Theory (Core Examination, Preliminary Examination for the Ph.D. and A.M. Degrees) · 1965
In equilibrium, a competitive firm has all the business (sales) it wants. Hence advertising is incompatible with either competition or equilibrium.
- University of Chicago · Price Theory (Core Examination, Preliminary Examination for the Ph.D. and A.M. Degrees) · 1965
The fact that a consumer, in equilibrium, is not consuming all of the possible commodities, implies that he gets increasing marginal utilities from the commodities that he does consume.
- University of Chicago · Price Theory (Core Examination, Preliminary Examination for the Ph.D. and A.M. Degrees) · 1965
A tax on American citizens who go abroad will reduce tourist expenditures and hence improve the U.S. balance of payments only if the demand for foreign trips is elastic.
- University of Chicago · Price Theory (Core Examination, Preliminary Examination for the Ph.D. and A.M. Degrees) · 1965
“Exploration for natural gas or oil is a form of investment. As such, like all investments, it depends on the expected level of future output (demand). Thus, a rise in the governmentally fixed (regulated) price of natural gas will decrease consumption and hence curb exploration. Conversely, lowering the price of gas will stimulate both consumption and exploration.” Appraise.
- University of Chicago · Price Theory (Core Examination, Preliminary Examination for the Ph.D. and A.M. Degrees) · 1965
Assume the following simple world, in which you are asked to determine the optimum rate of automobile accidents.
- University of Chicago · Price Theory (Core Examination, Preliminary Examination for the Ph.D. and A.M. Degrees) · 1965
The competitive private enterprise form of economic organization is regarded by some economists as a sort of ideal which it would be desirable to approximate in practice.
- University of Chicago · Economics 300A and 300B (Price Theory) · Milton Friedman, 1947
Assume that a comprehensive system of point rationing is superimposed on a money price system. Each consumer is given an equal number of points although money incomes are very unequal. Point prices exist for every commodity for which a money price exists, and a consumer must pay over both points and money to purchase a commodity. To simplify the analysis, assume throughout (1) that the points are dated, (that is, can be used only during a specific period), (2) that fixed and known quantities of various commodities are available each period.
- University of Chicago · Economics 300A and 300B (Price Theory) · Milton Friedman, 1947
(20 points) Define briefly:
- University of Chicago · Economics 300A and 300B (Price Theory) · Milton Friedman, 1947
Indicate briefly whether the following statements are correct or incorrect and why.
- University of Chicago · Economics 300A and 300B (Price Theory) · Milton Friedman, 1947
Part I
- University of Chicago · Economics 300A (Price Theory) · Milton Friedman, 1946
1. Comment briefly on the following two sentences, taken from newspaper stories:
- University of Chicago · Economics 300A (Price Theory) · Milton Friedman, 1946
2. Indicate which of the following statements are true (T) and which false (F):
- University of Chicago · Economics 300A (Price Theory) · Milton Friedman, 1946
1. Descriptive data:
- University of Chicago · Economics 300A (Price Theory) · Milton Friedman, 1946
2. Appraise the following quotation from A. C. Pigou: “Since elasticity measures variations in quantity (demanded or offered) divided by variations in a price, the elasticity of demand for anything will be seven times as large for seven similar demanders as it is for one.”
- University of Chicago · Economics 300A (Price Theory) · Milton Friedman, 1946
3. “As Sir R. Giffen has pointed out, rise in the price of bread makes so large a drain on the resources of the poorer laboring families and raises so much the marginal utility of money to them, that they are forced to curtail their consumption of meat and the more expensive farinaceous foods: and, bread being still the cheapest food which they can get and will take, they consume more, and not less of it.” Marshall, p. 132.
- University of Chicago · Economics 300A (Price Theory) · Milton Friedman, 1946
1. Define briefly the following terms:
- University of Chicago · Economics 300A (Price Theory) · Milton Friedman, 1946
2. Discuss critically the following quotation from Stigler:
- University of Chicago · Economics 300A (Price Theory) · Milton Friedman, 1946
3. Assume that the demand curve for complete flashlights of a standardized type is known; that the case and bulb are produced separately from the batteries; that the cost of putting the batteries in the case can be neglected; that the number and type of batteries put in each flashlight is fixed and unchangeable; that the supply curves of (1) case and bulb assembly and (2) batteries are known; and that the markets for complete flashlights, case and bulb assemblies, and batteries are reasonably competitive.
- University of Chicago · Economics 300A (Price Theory) · Milton Friedman, 1946
4. Statistical demand curves for fluid milk are derived by two different procedures.
- University of Chicago · Economics 300A (Price Theory) · Milton Friedman, 1946
5. “In conversations with gold mining engineers a phrase glibly and frequently repeated is ‘sweetening the ore.’ By this phrase reference is made to the practice of diverting production in profitable periods to the poorer ores and perhaps restricting output in the richer fields. Under this practice the better ores are preserved for periods in which mining costs have risen so that over a long period of time output can be held more steady. Contributing also to a policy of sweetening the ores is the reluctance of producers to install capital equipment in a period in which the tendency is for mining expenses to increase with the general advance of wages and living costs. By the time the equipment is installed it might be expected that wages and price levels would be adjusted to the increased price of gold.”
- University of Chicago · Economics 300A (Price Theory) · Milton Friedman, 1946
6. Assume a change in the laws so that less stringent conditions are imposed for bankruptcy and reorganization in a particular field (say the production of steel). As a consequence, a number of steel firms reorganize, wiping out a large part of their bonded debt. What would you expect to be the short- and long-run effects of these events on (a) the output and prices of the reorganized firms; (b) the amount of investment in the industry; (c) the rate of interest paid by the industry for new loans; (d) the output and prices of the industry? In each case, give the basis for your answer.
- University of Chicago · Economics 300 (Price Theory) · Albert Rees, 1962
Answer the following True, False, or Uncertain and explain your answer briefly. Your score depends on your explanation.
- University of Chicago · Economics 300 (Price Theory) · Albert Rees, 1962
Show by means of an indifference map (axes: oranges and grapefruit) the effect on the consumption of oranges of an increase in their price, the price of grapefruit remaining unchanged. Distinguish the income and the substitution effects. State whether you have used the Hicks or the Slutsky method.
- University of Chicago · Economics 300 (Price Theory) · Albert Rees, 1962
Increased costs cause manufacturers to reduce the size of 5 cent chocolate bars from 2-1/2 ounces to 2 ounces. Because the bars are smaller, people eat more of them and consumption rises from 10,000 bars a week to 11,000.
- University of Chicago · Economics 300 (Price Theory) · Albert Rees, 1962
Answer each of the following “true,” “false,” or “uncertain” and explain your answer briefly. Your score will depend heavily on your explanation.
- University of Chicago · Economics 300 (Price Theory) · Albert Rees, 1962
The New York, Ridgewood, and Exurban Railroad operates a commuter passenger service. Two kinds of reduced fares are offered: (1) children under 12 years of age ride at half-fare at all times. (b) on Wednesdays there are special half-fare tickets for adults good on trains leaving after 10:00 a.m. and returning before 4:30 p.m. The railroad has been accused by the New Jersey Commerce Commission of being a discriminating monopolist. Can you defend it against this charge with respect to either or both of its half-fare arrangements? If it is in fact a discriminating monopolist with respect to either arrangement, is it promoting an inefficient use of resources by its pricing practices?
- University of Chicago · Economics 300 (Price Theory) · Albert Rees, 1962
(a) Draw the short-run cost curves, demand curve, and marginal revenue curve of a monopolist who is suffering a short-run loss and is minimizing this loss. Indicate the amount of the loss on your diagram. (b) Show the same situation by means of short-run total cost and total revenue curves.
- University of Chicago · Economics 300 (Price Theory) · Albert Rees, 1962
A farmer has two plots of land on which he grows corn, plot A and plot B. The following table shows the amount of corn he can produce on each plot with varying applications of fertilizer of a given quality.
- University of Chicago · Economics 300B · Milton Friedman, 1951
“Productivity” is a catch-word in most general discussions of wage policy, as for example in the following quotation:
- University of Chicago · Economics 300B · Milton Friedman, 1951
Consider a hypothetical society in which there is no investment, either net or gross. All capital is completely permanent, not subject to change in form but capable of being used for different purposes. There is no selling or buying of capital goods: whoever owns the capital goods is forced by the laws or conventions of society to hold them and is permitted only to read them out (i.e., all capital is subject to the conventions that now govern human capital). Lending or borrowing is prohibited, so that there is no market rate of interest that matters, and all saving takes the form of hoarding of cash. The total amount of money in society is fixed in nominal units (say dollars).
- University of Chicago · Economics 300B · Milton Friedman, 1951
“The statement that wages tend to equal the net product of the worker’s labor… is not, as some have thought, an independent theory of wages, but only a particular way of wording the familiar doctrine that the value of everything tends to be equal to its expense of production.” (Marshall)
- University of Chicago · Economics 300B · Milton Friedman, 1951
(a) Discuss the meaning of “profits” in connection with the theory of distribution. Outline briefly “a” theory of “profits.”
- University of Chicago · Economics 300B · Milton Friedman, 1951
“Rent is but the leading species of a large genus.” Discuss.
- University of Chicago · Economics 300B · Milton Friedman, 1951
The income of farmers from the sale of their products depends on the prices at which the products sell. The general level of agricultural prices, in turn, depends primarily on the income of the nonfarm population. But the income of the nonfarm population depends on the prices of nonfarm products which, in turn, depends partly on the income of farmers.
- University of Chicago · Economics 300B · Milton Friedman, 1951
Beef sold in rural New England is mostly purchased from Chicago. Yet it is said that the retail price of the better cuts of beef is substantially less than in Chicago for the same grade of meat. Assuming that this is in fact the case. How would you explain this phenomenon in strictly economic terms? (I.e., do not give the easy – and probably wrong – explanation of irrationality, gouging, or the like). How would you test the validity of your suggested explanation?
- University of Chicago · Economics 300B · Milton Friedman, 1951
Suppose that legislative hearings were to be held on the following (a) A national bill to make the minimum wage rate very regionally, so it would be lower in the South than in the North; (b) A bill in a particular state to make it legal for manufacturers to enforce a minimum retail price on their products (a so-called “fair-trade” law).
- University of Chicago · Price Theory (Ph.D. Core Examination) · 1975
Indicate whether each of the following statements is TRUE, FALSE, or UNCERTAIN. In each case write a few sentences explaining your answer. Your grade will be determined by your explanation.
- University of Chicago · Price Theory (Ph.D. Core Examination) · 1975
In most states it is illegal for drug stores to advertise the prices of prescription drugs. A customer can find out the price of a prescription drug only by asking the pharmacist in person. In addition only pharmacists licensed by the state are allowed to dispense drugs and every drug store must employ at least one licensed pharmacist. One can become a licensed pharmacist by passing an examination administered by the state and written by a board of pharmacists. Finally, a pharmacist must fill a prescription exactly as it is written by the physician and may not substitute a generically equivalent drug.
- University of Chicago · Price Theory (Ph.D. Core Examination) · 1975
We are presently importing considerable oil at the $10 barrel price, and producing domestically at a free price from new wells and a $5 price from “old” wells (on amounts they produced before the oil price rises).
- University of Chicago · Price Theory (Ph.D. Core Examination) · 1975
Translate into the apparatus of indifference curves and budget lines the following phenomena:
- University of Chicago · Price Theory (Ph.D. Core Examination) · 1975
Assume there is an exhaustible resource that can be extracted at a constant marginal cost c. Assume there is a competitive industry that extracts this resource. Derive the behavior of the equilibrium price over time if the demand schedule for the product remains constant over time.
- University of Chicago · Price Theory (Ph.D. Core Examination) · 1975
Ontario imposes a tax of 30 percent on the sale or bequest of any land to non-Canadians. What are the effects of such a tax on:
- University of Chicago · Economics 300A and B (Price Theory) · Milton Friedman, 1951-52
In an anti-trust case against the Aluminum Company of America, Judge Learned Hand argued that the Aluminum Company could be regarded as having essentially a complete monopoly on aluminum despite the existence of a highly competitive market in secondary or reclaimed aluminum (made from scrap) accounting for about one-third of the total aluminum used for fabrication. He justified this conclusion on the grounds that all secondary aluminum derives ultimately from primary aluminum produced earlier and hence that the Aluminum Company through its control of the output of primary aluminum indirectly controlled the quantity of scrap available.
- University of Chicago · Economics 300A and B (Price Theory) · Milton Friedman, 1951-52
It is widely argued that entrepreneurs engaged in a number of different activities somehow have a “competitive advantage” over entrepreneurs engaged only in one even if no technical economies are achieved by combining the activities. This general argument and the supposed advantage take many different forms: sometimes it is that one activity provides a “guaranteed” market for another activity; sometimes that one activity provides financing or capital for another; sometimes that a monopoly in one line confers an advantage in another. A recent example of this reasoning is contained in a report by The Chicago Daily news financial columnist on November 20, 1951 that Sears-Roebuck had completed an arrangement with Kaiser-Frazer to market an automobile under the name of “Allstate.” The columnist commented “also there is the Allstate Insurance Company, a wholly owned subsidiary, which would benefit heavily through liability and other policies written in connection with the sales of an Allstate automobile….Some of the gossip around Detroit has been to the effect that the Allstate would have Sears batteries and tires and certain other Sears accessories as original equipment—which would mean more business for these departments of the company.”
- University of Chicago · Economics 300A and B (Price Theory) · Milton Friedman, 1951-52
(a) Appraise: “Recent studies of domestic consumption in low-cost municipalities demonstrate that the demand for electric current is highly elastic, expanding rapidly as the cost declines. The national average consumption of the United States was 604 kilowatt-hours in 1933. The average charge to consumers on October 1, 1934, for the whole country is reported as 5.4 cents per kilowatt-hour. In Seattle where the average cost is 2.58 cents, the average consumption is 1,098 kilowatt-hours. In Tacoma, the charge is 1.726 cents and the consumption 1,550. In 26 cities of Ontario, the average charge is 1.45 cents and the consumption 1,780. Finally, in Winnipeg, where the average net charge is only 8 mills per kilowatt-hour the average per capita consumption exceeds 4,000 kilowatt-hours.” (Report of the National Resources Board, December 1, 1934, Government Printing Office, 1934, p. 39.)
- University of Chicago · Economics 300A and B (Price Theory) · Milton Friedman, 1951-52
(a) Figure 1 gives the locus of points of tangency between indifference curves and budget lines parallel to ab (and cd). ABCDEFGH is therefore and “expansion path” or curve showing the quantity of X and Y and individual would buy at different incomes and constant relative prices. Fill in the following table with as precise statements as are deducible from Fig. 1 by observation without measurement:
- University of Chicago · Economics 300A and B (Price Theory) · Milton Friedman, 1951-52
“Monopolistic competition robs the old concept of industry (and also the Chamberlinian group) of any theoretical significance…The value of these groupings is only a concrete, empirical one…Which firms shall be included in any one group will have to be decided, not on an a prioribasis, but after an empirical survey of market realities…In the general pure theory of value, the group and the industry are useless concepts…When the study of competition is freed from the narrowing assumptions of pure competition, only two terms remain essential for the analysis: the individual firms, on the one hand; the whole collectivity of competitors on the other.” (Triffin)
- University of Chicago · Economics 300A and B (Price Theory) · Milton Friedman, 1951-52
Find the mistakes (there are at least six) in the accompanying diagram showing long and short run marginal and average cost curves, and explain the general principle corresponding to each particular mistake.
- University of Chicago · Economics 300A and B (Price Theory) · Milton Friedman, 1951-52
The accompanying diagram showing a set of indifference curves between income and work is part of a diagram given by Boulding in Economic Analysis in his discussion of the effects of various types of direct taxation, and reproduced by Schwartz and Moore in the March 1951 American Economic Review. The latter write, “Given O Q2Q5 as a rate of pay, the equilibrium position is P1 where the rate of pay is equal to the MRS between leisure and income. Let us assume that we are to collect a tax from this individual equal to OL. One method of collecting the tax would be to levy a poll tax, leaving the rate of pay unaltered, as LP5. Another direct tax would be a proportional income tax represented by OSP2 which would have the effect of lowering (flattening) the rate of ‘take-home’ pay. To extract the same amount of revenue as the poll tax does, this rate of pay must be tangent to an indifference curve at an intersection with LP5. Thus P2Q2 = OL. Since the rate of ‘take-home’ pay is flatter, P2 must lie below and to the left of P5; i.e. less effort is expended and the worker enjoys a smaller net income. More important, his welfare is diminished because he must be on a lower indifference curve…Given the premises of the conventional indifference curve pattern, this must necessarily be true.”
- University of Chicago · Economics 300A and B (Price Theory) · Milton Friedman, 1951-52
Available evidence tentatively indicates that (1) average income of white families living in the same size city is roughly the same in the North and the South; (2) the wage rate of a white worker in any given occupation is higher in the North than in the South for cities of the same size; (3) property income is roughly of equal importance for white families in the North and the South.
- University of Chicago · Economics 300A and B (Price Theory) · Milton Friedman, 1951-52
Indicate whether each of the following statements is true (T), false (F), or uncertain (U), and state briefly the reason for your answer. It is to be understood that in each question the appropriate “other things” are to be held constant.
- University of Chicago · Economics 300A and B (Price Theory) · Milton Friedman, 1951-52
“The wages of every class of labour tends to be equal to the net product due to the additional labour of the marginal labourer of that class.
- University of Chicago · Economics 300A and B (Price Theory) · Milton Friedman, 1951-52
It is frequently argued that a tax on a product imposed at the manufacturing level involves a greater burden on consumers than a tax yielding the same revenue imposed at the retail level because the tax is “pyramided,” i.e., the “margins” of wholesalers and retailers are viewed as given percentages of purchase price and so, it is argued, price will tend to rise not only by the tax but also by the “margins” on the tax.
- University of Chicago · Economics 300A and B (Price Theory) · Milton Friedman, 1951-52
The price of nylon thread for use in making women's hosiery was recently lowered drastically when DuPont decided to make much larger quantities available. The resulting decline in the price of hosiery was viewed by at least some manufacturers and retailers as a misfortune and as portending smaller profits for themselves. Were they right? In the short run? In the long run? Justify your answers.
- University of Chicago · Economics 300A and B (Price Theory) · Milton Friedman, 1951-52
A subsidy of $X is paid per acre of land devoted to growing soy beans. Will this lead to a rise or to a decline in the yield per acre on land devoted to growing soy beans prior to the introduction of the subsidy? Justify your answer.
- University of Chicago · Economics 300A and B (Price Theory) · Milton Friedman, 1951-52
(a) What is the Pigou effect? What relevance does it have to the theory of the rate of interest?
- University of Chicago · Economics 332 · Milton Friedman, 1966-67
In an economy using fiduciary money, it costs nothing to create additional cash balances. Hence, it is desirable to encourage wealth-holders to hold additional cash balances so long as they get any additional non-pecuniary return from them. One way to do so is through a deliberate policy of announced deflation.
- University of Chicago · Economics 332 · Milton Friedman, 1966-67
Indicate in each box whether the change in the indicated variable would, under the specified conditions, tend to be an increase (+), decrease (-), no change (0), or is uncertain (?). In each case, of course, assume other relevant variables unchanged.
- University of Chicago · Economics 332 · Milton Friedman, 1966-67
An earthquake destroys half the physical capital in a country but miraculously there is negligible loss of life. The earthquake was most unusual, was unexpected and no one expects a repetition.
- University of Chicago · Economics 332 · Milton Friedman, 1966-67
“The relation between the volume of economic activity and the price level is not simple. As a first approximation, the classical law of supply and demand leads one to expect that the change in the price level will depend mainly on the size of the gap between capacity and actual output” 1966 Annual Report, Council of Economic Advisers, pp. 63-64.
- University of Chicago · Economics 332 · Milton Friedman, 1966-67
Consider a hypothetical economy in which initially, government expenditures (G) are 100, private investment (I) is 50, and private consumption (C) is 350, so that national product (Y) is 100 + 50 + 350 = 500, and tax receipts (T) are 90. Assume that G and T are both reduced by 10 to 90 and 80 respectively, and that wage rates are rigid.
- University of Chicago · Economics 332 · Milton Friedman, 1966-67
Discuss the “real balance effect,” indicating what you think to be its meaning, and what role it has played in discussions of the possibility of under-employment equilibrium. In the course of your answer indicate what economists have been the main contributors to the discussion and what their specific contributions have been.
- University of Chicago · Economics 332 · Milton Friedman, 1966-67
MONETARY vs. FISCAL POLICY
- Columbia University · G6213x (Microeconomic Theory) · Gary S. Becker, 1965
Answer each of the following as true, false or uncertain and justify your answer in the space provided.
- Columbia University · G6213x (Microeconomic Theory) · Gary S. Becker, 1965
Treat charitable contributions as a commodity entering the utility functions or indifference curves systems of the contributor. Assume, as is largely true, that contributions can be deducted from income in arriving at taxable income. Assume a proportional tax rate equal to t.
- Columbia University · G6213x (Microeconomic Theory) · Gary S. Becker, 1965
Suppose the traffic department would like to enforce parking regulations in an efficient way. Assume that each person has the choice of parking illegally or legally; the latter costs X dollars per “day” and the former, if one is caught, causes a fine equal to F dollars per time caught.
- Columbia University · G6213x (Microeconomic Theory) · Gary S. Becker, 1965
Suppose the earnings of military personnel were set below the price that would make the number of volunteers equal to the demand by the military, and that draft calls were sent out strictly at random to males aged 18-26 to bring the number entering up to demand
- George Mason University · Economics 811 · Walter E. Williams
(a) Is it possible to have a situation of general equilibrium without having all individual optimality conditions fulfilled? Explain.
- George Mason University · Economics 811 · Walter E. Williams
The concept of marginal utility is subject to the objection that it implies a numerical measurement of total utility. How can we overcome this difficulty? Translate into terms which do not involve the cardinal measurement of utility:
- George Mason University · Economics 811 · Walter E. Williams
Sketch the indifference curve mappings implied by each of the following. Show the preference directions in each case:
- George Mason University · Economics 811 · Walter E. Williams
Soviet planners do use open markets to permit relative prices to influence resource allocation. Briefly explain the role of prices in an economic system and the possible effects of restricting the role of prices.
- George Mason University · Economics 811 · Walter E. Williams
In a situation with two commodities, X and Y, and starting with an individual’s interior (non-corner) endowment, derive his demand curve for commodity X. Is the demand curve derived one with real income constant in the Hicksian or Slutsky sense? First, however, explain the Hicksian versus Slutsky demand curves.
- George Mason University · Economics 811 · Walter E. Williams
In the present real world we seldom observe “market clearing” prices. Sometimes we even observe zero prices. How can you account for these two phenomena that appear to contradict economic theory?
- George Mason University · Economics 811 · Walter E. Williams
Imagine a community of individuals engaging in private production but where the idea of market exchange had not yet been discovered. Explain analytically the nature of the gains available after the discovery of exchange possibilities. Would every member of the community benefit, or might some be harmed as a result of the discovery?
- George Mason University · Economics 811 · Walter E. Williams
What is an income-compensated demand curve? Carefully derive one graphically. How does it differ from an ordinary demand curve? For a normal good, which of the two curves is more elastic? Why? What might be an empirical use of an income-compensated demand curve?
- George Mason University · Economics 811 · Walter E. Williams
Imagine a community of two individuals. Individual A’s endowment shows him rich in good X and relatively poor in good Y. Individual B’s endowment is just the opposite. Heretofore unknown exchange opportunities become available and known and the exchange rate for good X and Y that appears (it matters none to you from whence this exchange rate come) is equal to neither A nor B’s subjective exchange rate. Explain analytically the nature of the gains from exchange. Would each member of the community benefit from exchange or is there a possibility that a lose might be incurred? Why?
- George Mason University · Economics 811 · Walter E. Williams
“Since 1900 real income has increased tremendously, yet the average number of children per family has decreased.” Consider the following possible explanations, and graphically illustrate in terms of market opportunities and indifference curves between the number of children (x) and all other goods (y). Children are inferior goods; since we are richer we want fewer of them. (b) Children are not inferior goods; however, it has become more expensive to bear and raise children. (c) Children are not inferior goods, nor have they become relatively more expensive. What has happened is that tastes have changed.
- George Mason University · Economics 811 · Walter E. Williams
Evaluate. “Chinese labor is far less productive than American labor as evidenced by the fact that it takes so of it to get jobs done. One the other hand, American wheat land is less fertile than wheat land in Europe (e.g., France) as evidenced by the lower yield per acre in the United States.”
- George Mason University · Economics 811 · Walter E. Williams
Explain the following accurate statement: The gain from search activity is related to the dispersion of prices charged by different sellers. The gain is also related to the fraction of the individual’s income spent of the good and its income elasticity. Give a real world example of a good whereby the buyer searches a little and another good whereby the buyer searches a lot. Explain why.
- George Mason University · Economics 811 · Walter E. Williams
Gresham’s law states: “Bad goods drive out the good (goods).” However, we see good wine and bad wine, bad books and good books, bad women and good women; and bad economics professors and good ones. Reconcile Gresham’s law with the evidence above.
- George Mason University · Economics 811 · Walter E. Williams
What are the essential characteristics of exchange opportunities and production opportunities, on the social levels?
- George Mason University · Economics 811 · Walter E. Williams
(a) Is it possible to have a situation of general equilibrium without having all individual optimality conditions fulfilled? Explain.
- George Mason University · Economics 811 · Walter E. Williams
(a) Explain the meaning of the statement: “In the theory of demand, a demand function, such as , is linearly homogenous of degree zero.”
- George Mason University · Economics 811 · Walter E. Williams
What does it mean if an indifference curve between goods X and Y (a) becomes parallel to the X axis, (b) is positively sloped and has higher indifference curves to its right, (c) is positively sloped and has higher indifference curves to its left, (d) is negatively sloped and has higher indifference curves to its left?
- George Mason University · Economics 811 · Walter E. Williams
Assume that the cost of a unit of search is the same for all goods and all have the same price variability in the absence of search.
- George Mason University · Economics 811 · Walter E. Williams
What are the four essential properties of indifference curves between two goods? Explain the justification for each property.
- George Mason University · Economics 811 · Walter E. Williams
What is the meaning of the expression “The optimum of the consumer”?
- George Mason University · Economics 811 · Walter E. Williams
Characterize (graphically) a normal good, an inferior good, and an ultra-superior good. Give examples of each. For two goods X and Y, which of the above must they be if the Income Expansion Path (IEP) has a positive slope? What can you say if the (IEP) has a negative slope?
- George Mason University · Economics 811 · Walter E. Williams
Demand curves tend to be more elastic in the long run than in the short run. Explain.
- George Mason University · Economics 811 · Walter E. Williams
Which good will have a greater fall in its price as the crop is more fully harvested: one that will store more readily or one that is more perishable? Why?
- George Mason University · Economics 811 · Walter E. Williams
What is an income-compensated demand curve? How does it differ from the ordinary demand curve? For a normal good (positive income elasticity), which of the two curves is the more elastic? Why?
- George Mason University · Economics 811 · Walter E. Williams
Gresham’s Law states: “Bad goods drive out the good (goods)”. However, we see good wine and bad wine, bad books and good books, bad professors and good professors. Reconcile Gresham’s Law with the empirical evidence cited above. Does the evidence tend to refute Gresham’s Law? Why?
- George Mason University · Economics 811 · Walter E. Williams
Exchange consists of acts which allow the possibility of trading endowment elements with other members of society– exchange opportunities only arise in a social context. Production opportunities represent alternative combinations attainable by transformation or dealing with nature. In exchange, the quantity supplied of a commodity must equal quantity taken –i.e., algebraic sum of supply and demand must equal zero for every commodity. Exchange conserves the social totals of commodities. Production alters the social totals, i.e., less of some goods, more of others.
- George Mason University · Economics 811 · Walter E. Williams
In a situation with two commodities, and , starting with an individual’s interior (non-corner) endowment, derive his demand curve for commodity . Is the demand curve derived one with real income constant in the Hicksian or Slutsky sense? First explain the Hicksian vs Slutsky demand curves.
- George Mason University · Economics 811 · Walter E. Williams
Many shopping centers provide zero price parking for their clients. Some have argued that such policy leads to inefficient location of resources since to insure sufficient parking for center clientele space must be provided for “freeloaders” who shop at stores near the center. Who gains from the zero price parkings? How? Would it be economically more efficient for centers to allocate parking space by price?
- George Mason University · Economics 811 · Walter E. Williams
Give brief (a sentence or two) comments to the following:
- George Mason University · Economics 811 · Walter E. Williams
Give brief (a sentence or two) comments to the following:
- George Mason University · Economics 811 · Walter E. Williams
Give brief answers to the following:
- George Mason University · Economics 811 · Walter E. Williams
(a) Is it possible to have a situation of general equilibrium without having all individual optimality condiions fulfilled? Explain.
- George Mason University · Economics 811 · Walter E. Williams
What are the four essential property of indifference curves between two goods? Explain the justification for each property.
- George Mason University · Economics 811 · Walter E. Williams
Assume a simple competitive economy with J individuals and 2 goods X and Y. Both production and exchange can take place. Every individual has identical tastes and opportunities (so that the single-individual solution will be a miniature representation of the social solution). Assume, further, that all endowments consist only of the numeraire commodity, Y.
- George Mason University · Economics 811 · Walter E. Williams
Economists sometimes say that monopoly is “inefficient”. Explain the meaning of “inefficiency” in this context. Show analytically how this inefficiency comes about.
- George Mason University · Economics 811 · Walter E. Williams
(a) In a situation with two commodities X and Y, starting with an individual’s interior (non-corner) endowment derive his demand curve for commodity X. Is this an “excess-demand” curve or a “full-demand” curve?
- George Mason University · Economics 811 · Walter E. Williams
What are the essential characteristics of exchange opportunities and productive opportunities, on the individual and on the social levels?
- George Mason University · Economics 811 · Walter E. Williams
It has been said that exchange makes possible new types ofproductive opportunities as well, through the institution of the firm. Analyze.
- George Mason University · Economics 811 · Walter E. Williams
Assuming an ordinary-shaped long-run average-cost curve in advance of any “fixed-cost” commitment (a so-called “planning curve”), indicate the shape of the relevant average-cost after such a commitment:
- George Mason University · Economics 811 · Walter E. Williams
Give very brief (one paragraph) answers to the following:
- George Mason University · Economics 811 · Walter E. Williams
Demonstrate the solution for the standard Fisherian 2-period model for the individual with both productive and credit market exchange opportunities. The individual here is assumed to have an interior endowment which does not coincide with his productive and consumptive optima. Carefully label your graph to show the amounts consumed, produced, borrowed or lent (if applicable), invested or disinvested, and wealth. Having shown the foregoing, show the effects of a fall in the interest rate. Briefly account for your results.
- George Mason University · Economics 811 · Walter E. Williams
An urban rapid-transit line runs crowded trains (200 passengers per car) at rush hours, but very empty trains (ten passengers per car) at off peak hours. A management consultant makes the following argument:
- George Mason University · Economics 811 · Walter E. Williams
A number of techniques are available to cope with increased scarcity and higher world prices of petroleum. Analyze the following in terms of supply-demand responses in the short run and long run:
- George Mason University · Economics 811 · Walter E. Williams
Atomistic markets are supposed to permit the achievement of Pareto optimality where externalities are absent. Explain the meaning of this statement. Do externalities offer unambiguous proof of market inefficiency or is it possible for externalities to be consistent with market efficiency? Explain.
- George Mason University · Economics 811 · Walter E. Williams
The literature on the behavior of the firm poses it as a profit maximizer, a wealth maximizer, a growth maximizer, a sales maximizer, a sales maximizer subject to a prescribed profit rate. Which of these do you use (why?) and how do you manage to allow for these other assertions of firm behavior?
- George Mason University · Economics 811 · Walter E. Williams
Perfect (pure or price-takers) markets is supposed to permit achievement of Pareto Optimality, where externalities are absent. Explain the meaning of this statement. Do externalities offer unambiguous proof of market inefficiency or is it possible for externalities to be consistent with market efficiency?
- George Mason University · Economics 811 · Walter E. Williams
The marginal productivity basis of the demand for labor is inapplicable to cases in which the labor is doing research, teaching or in other cases where there is no identifiable measurable product or in situations where there is non-market allocation of services. Evaluate.
- George Mason University · Economics 811 · Walter E. Williams
If two people work jointly in production, it is impossible to tell who produced how much. What then is the meaning of the statement: that each gets what he produces?
- George Mason University · Economics 811 · Walter E. Williams
Construct a model of an individual who has an interior endowment of intertemporal receipts and an associated intertemporal consumption plan. Imagine that there is a fall in the interest rate.
- George Mason University · Economics 811 · Walter E. Williams
What economic forces explain each of the following phenomena? Give a logically complete discussion in each case.
- George Mason University · Economics 811 · Walter E. Williams
Oysters settle and grow in shallow water in areas known as oyster beds. In some states (private property states), most oyster beds are privately owned and can only be exploited with the permission of the owner. In other states (common property states), most oyster beds are the common property of all and may be exploited by anyone. Investigators found that (1) prices of oysters were lower in common property states than in otherwise similar private property states, (2) oysters were marketed earlier (oysters were smaller) in common property states. Explain why. Which arrangement is preferable and why?
- George Mason University · Economics 811 · Walter E. Williams
Price-takers markets are supposed to permit the achievement of Pareto Optimality where externalities are absent. Explain the meaning of this statement. If externalities exist will optimality necessarily be denied? Why?
- George Mason University · Economics 811 · Walter E. Williams
Give very brief answers to the following:
- George Mason University · Economics 811 · Walter E. Williams
The Cobb-Douglas production function has the following form:
- George Mason University · Economics 811 · Walter E. Williams
Evaluate the following: The way to get people to keep future generations in mind as they make current decision concerning the use of scarce natural resources is to allow them to hold private property rights over these resources which they can transfer. How would your answer differ if transfer rights were denied?
- George Mason University · Economics 811 · Walter E. Williams
Most cities and towns that allow the sale of alcoholic beverages require all seller of liquor to have a license. Not only is the number of licenses strictly limited, but the prices of such a procedure on: (a) liquor prices; (b) the profits to sellers of liquor at the retail level? What would happen to prices and profits if cities and towns limited the number of licenses and auctioned them to the highest bidder? What are the effects on the distribution of wealth of the price-regulated method versus the market method of allotting licenses?
- George Mason University · Economics 811 · Walter E. Williams
Discuss the following statement: “In a competitive market the least cost production techniques are revealed through entry and exit, while in public utility regulation they are revealed by commission rate hearing. It is easier to fool the commission than the market. Therefore, whenever possible competition should be permitted.”
- George Mason University · Economics 811 · Walter E. Williams
You are the absolute czar and head of a union of 1,000 plumbers in Austin, Texas. You have the absolute power to set the wage at which the plumbers will work. The economist that you have hired tells you that the demand for plumbers in Austin is , where Q is the number of plumbers employed and W is their wage. If there were no other plumbers in Austin, what wage would you set if (a) you wished to achieve full employment at the highest possible wage, (b) you wished to achieve maximum total payments to plumbers? Get the elasticities of demand for plumbers at the wages identified in (a and b) both answers.
- George Mason University · Economics 811 · Walter E. Williams
Armen Alchian’s definition of costs differs from the standard textbook definition. What is the difference? Explain how his definition may be better. Why does he use capital values in his measurement of costs?
- George Mason University · Economics 811 · Walter E. Williams
“The distinction between the long run and the short run is a fiction with no counterpart in the real world.” Evaluate this criticism, explaining why one might make the statements, but show how this fictional distinction might be defended.
- George Mason University · Economics 811 · Walter E. Williams
Suppose you were in a country where the charging of interest was prohibited by law. How could you tell whether the present price of future goods changed? What kind of evidence would you look for. Justify your choice of evidence and indicate the direction of the change in the present price of future goods.
- George Mason University · Economics 811 · Walter E. Williams
Why is most productive activity carried out by firms rather than by individuals who contract mutually with one another?
- George Mason University · Economics 811 · Walter E. Williams
Show how behavior of its own members may threaten the survival of a cartel. Show how the behavior of outsiders may threaten it.
- George Mason University · Economics 811 · Walter E. Williams
With the advent of the women’s liberation movement, there is reason to believe that women’s preferences may be changing so as to make the reservation uses of their time less attractive than before in comparison to market employment. What effect would such a taste change have upon the supply curve of female labor? Upon the relative market wages of male and female workers?
- George Mason University · Economics 811 · Walter E. Williams
Assume that men and women are equally productive in a certain occupation but the conditions of supply between men and women differ is not numerically different). Produce an argument showing that the profit maximizing firm will engage in wage discrimination between men and women. Make sure you explain the supply differences.
- George Mason University · Economics 811 · Walter E. Williams
“If the minimum wage law is eliminated, it will only shift the burden of unemployment from sons to fathers.” Evaluate.
- George Mason University · Economics 811 · Walter E. Williams
Write a very short comment on each of the following questions:
- George Mason University · Economics 811 · Walter E. Williams
Formulate a high quality question (not one found in the handout). Answer this question.
- George Mason University · Economics 811 · Walter E. Williams
“A rise in the rate of interest will generally tend to make young people better off and old people worse off.” Would you regard this as a decent generalization? Discuss. Explain what assumptions are relevant to appraising the statement.
- George Mason University · Economics 811 · Walter E. Williams
“The wage rate is determined by the marginal productivity of labor.” If someone offers this statement as a formulation of the marginal productivity theory of wages, what corrections or amendments will you insist upon? Explain.
- George Mason University · Economics 811 · Walter E. Williams
D.H. Robertson divides the effects which “an artificial raising of wages” is apt to have on employment into “two analytically separable reactions”–first, “A movement along the existing marginal productivity curve,” and second, “a cumulative lowering of the curve.” Explain the two reactions and indicate what assumptions concerning the other factors of production are involved.
- George Mason University · Economics 811 · Walter E. Williams
Prove that for a monopolist faced with a straight lined demand curve and forced to charge a uniform price to all buyers, total revenue will be at a maximum if the quantity sold is exactly half the quantity which buyers would take at a price of zero. Nota bene: Mathematical exposition will help you here thought not necessary for the answer.
- George Mason University · Economics 811 · Walter E. Williams
“Perfect (price-takers’) markets is supposed to permit achievement of Pareto Optimality, where externalities are absent.” Explain the meaning of this statement. If externalities exist will the optimality be denied? Why?
- George Mason University · Economics 811 · Walter E. Williams
“Monopolistic competition is inefficient.” Explain and evaluate that assertion. Then defend the proposition that neither Pareto optimality nor efficient allocation is a relevant criteria for real decision making in the honest-to-god world.
- George Mason University · Economics 811 · Walter E. Williams
Alchian’s definition of cost differs from the standard textbook definition. What is the difference? Explain how his definition may be better.
- George Mason University · Economics 811 · Walter E. Williams
Explain how cost curves are “monetized” values of product curves.
- George Mason University · Economics 811 · Walter E. Williams
Using elementary economic theory, write short explanations to the following statements:
- George Mason University · Economics 811 · Walter E. Williams
Gasoline price “wars” have induced many gasoline-station owners to propose a regulatory agency to establish orderly marketing conditions in gasoline markets. Also they proposed that no service station be allowed to charge a price loss than cost, and further that no new stations be opened unless the convenience and necessity of the area warrants more stations.
- George Mason University · Economics 811 · Walter E. Williams
(a) In a competitive (atomistic) industry, suppose that a maximum wage law lower than the equilibrium wage is imposed and enforced. Indicate graphically the implication for employment in the industry, the areas representing distributive transfer(s) and those areas representing social gains or losses.
- George Mason University · Economics 811 · Walter E. Williams
“A rise in the interest rate tends to moderate aggregate demand and so is anti-inflationary. But interest is a cost of business and the increase in cost tends to raise prices. Hence on balance it is not clear whether w rise in the interest rates tends to counter inflation.” Analyze.
- George Mason University · Economics 811 · Walter E. Williams
“Human life is priceless.” Analyze.
- George Mason University · Economics 811 · Walter E. Williams
The Marxist doctrine of distribution is “to each according to his needs and from each according to his ability” while the capitalist doctrine is “. . . to each according to what he produces.” Explain the meaning of each statement.
- George Mason University · Economics 811 · Walter E. Williams
Why do shopping center developers try to purchase as much of the adjacent land as possible?
- George Mason University · Economics 811 · Walter E. Williams
“A substantial number of relatively unskilled persons reported that they cannot find work. At the same time there are many unfilled jobs for relatively skilled people. Apparently, the problem is that there are more unskilled people than unskilled jobs.” What is wrong with that reasoning?
- George Mason University · Economics 811 · Walter E. Williams
“On a proportional basis, there are too many Negroes and too few Jews among professional athletes. This shows that sports have overcome racial discrimination but not religious discrimination.” Comment.
- George Mason University · Economics 811 · Walter E. Williams
Give economic interpretation of the following excerpts from Exodus and Deuteronomy: Nonsense is forbidden!
- George Mason University · Economics 811 · Walter E. Williams
Explain what is meant by “Pareto optimal.” Why is it used so widely? (Do not state all the conditions that must hold for it to exist.) Is it consistent with compulsory licensing of doctors, prescriptions for drugs, approval by the Securities and Exchange Commission before securities are sold, tariffs, franchises for public transportation, minimum wage laws, non-exchangeable rights to be a U.S. citizen, anti-discrimination laws and anti-murder laws? Explain.
- George Mason University · Economics 811 · Walter E. Williams
“Rent is price-determined, not price determining.” Explain why this statement is both true and false. In your answer explain what is meant by rent.
- George Mason University · Economics 811 · Walter E. Williams
In macroeconomic analysis, the possibility of economic equilibrium with a degree of unemployment is ordinarily assumed. But in microeconomic analysis, we generally postulate that prices must be such to clear markets. Is it possible to give a microeconomic explanation for unemployment, without calling upon wage rigidities due to government or union action to keep wage rates from falling: Show how it is, if it is.
- George Mason University · Economics 811 · Walter E. Williams
It is sometimes argued that since future generations are not in any position to cast dollar votes (or for that matter any other vote) in influencing the saving-investment decisions of the current generation, there will be under-provision of the needs of the future because of “selfishness” on the part of the current generation. The rapid exploitation and even destruction of may of our natural resources are often cited as evidence for this contention. On the other hand, there is the indisputable evidence from modern history that each successive generation had been left richer than its predecessor. Comment and include the reason why present generations enrich future generations; what is the quid pro quo? (Remember that in this exchange future generations have not done anything for present generations.)
- George Mason University · Economics 811 · Walter E. Williams
What is the difference between collusion, cooperation and competition? How would you define collusion between two people so as to exclude partnerships and corporate joint ownership from the concept of collusion? Why is collusion considered undesirable? How can you differentiate between an effective collusion and an ineffective collusion?
- George Mason University · Economics 811 · Walter E. Williams
Give short, but complete, answers to the following:
- George Mason University · Economics 811 · Walter E. Williams
Given an interior endowment explain how the possibility of trade can lead individuals to consumptive benefits (preferred allocations of given social totals over different individuals and productive benefits (larger social totals of desired goods). Make your case using either graphical and/or algebraic analysis.
- George Mason University · Economics 811 · Walter E. Williams
Is it possible to have a situation of general equilibrium without having all individual optimality conditions fulfilled? Explain. Is it possible to have all individual optimality conditions fulfilled without the state of the system as a whole being Pareto optimal?
- George Mason University · Economics 811 · Walter E. Williams
Give very brief (one paragraph) answers to the following:
- George Mason University · Economics 811 · Walter E. Williams
Evaluate the following: The most effective way to get people to keep future users of scarce natural resources in mind as they make their current decisions on use is to allow them to hold private property rights over these resources which they can transfer. How would your answer differ if transfer rights were denied?
- George Mason University · Economics 811 · Walter E. Williams
Write brief answers explaining each of the following:
- George Mason University · Economics 811 · Walter E. Williams
Economists sometimes say that monopoly is “inefficient.” Explain the meaning of “inefficiency” in this context. Show analytically how this inefficiency comes about.
- George Mason University · Economics 811 · Walter E. Williams
Explain Friedman’s concept of the “real-income-constant” demand curve. Is the demand curve just derived one with real-income-constant in his sense?
- George Mason University · Economics 811 · Walter E. Williams
What are the essential characteristics of exchange opportunities and productive opportunities, on the individual and on the social levels?
- George Mason University · Economics 811 · Walter E. Williams
Imagine a community of individuals engaging in private production, but where the idea of market exchange had not yet been discovered. Explain analytically the nature of the gains available after the discovery of the possibilities of exchange. Would every member of the community benefit, or might some lose as a result of the discovery?
- George Mason University · Economics 811 · Walter E. Williams
It has been said that exchange makes possible new types of productive opportunities as well, through the institution of the firm. Analyze.
- George Mason University · Economics 811 · Walter E. Williams
Assuming an ordinary-shaped long-run average-cost curve in advance of any “fixed-cost” commitment (a so-called “planning curve”), indicate the shape of the relevant average-cost curve after such a commitment:
- George Mason University · Economics 811 · Walter E. Williams
Explain how cost curves are monetized values of product curves.
- George Mason University · Economics 811 · Walter E. Williams
Construct a model of the price discriminating monopolist who sells in two markets. Show the quantities and prices for both markets that will maximize profits. What are the necessary conditions for price discrimination? Does price discrimination lead to a more “socially desirable” outcome? Explain.
- George Mason University · Economics 811 · Walter E. Williams
Unemployment means that there are not enough jobs to go around. Apply economic analysis to this statement.
- George Mason University · Economics 811 · Walter E. Williams
Given two isolated markets supplied by a single monopolist, let the two corresponding demand functions be:
- George Mason University · Economics 811 · Walter E. Williams
“Since 1900 real income has increased tremendously, yet the average number of children per family has decreased.” Consider the following possible explanations, and illustrate in terms of market opportunities and family indifference curves between the number of children (x) and all other goods (y). (a) Children are inferior goods; since we are richer we want fewer of them. (b) Children are not inferior goods; however, it has become more expensive to bear and raise children. (c) Children are not inferior goods, nor have they become relatively more expensive to raise. What has happened is that tastes have changed.
- George Mason University · Economics 811 · Walter E. Williams
Price discrimination may lead to more efficient allocation of resources. Do you agree or disagree? Explain first what you mean by efficient allocation of resources.
- George Mason University · Economics 811 · Walter E. Williams
“The wage rate is determined by the marginal productivity of labor.” If someone offers this statement as a formulation of the “marginal Productivity theory of wages,” what corrections or amendments will you insist on? Explain.
- George Mason University · Economics 811 · Walter E. Williams
With the advent of the women’s liberation movement, there is reason to believe that women’s preferences may be hanging so as to make the reservation uses of their time less attractive than before in comparison to market employment. What effect would such a taste change have upon the supply curve of female labor” Upon the relative market wages of male and female workers? If employees perceived the differences between sexes it would lead to a decrease in wages relative to wages.
- George Mason University · Microeconomics 306 · Walter E. Williams
“A substantial number of relatively unskilled persons reported that they cannot find work. At the same time, there are many unfilled jobs for relatively skilled people. Apparently, the problem is that there are more unskilled people than unskilled jobs.” What is wrong with the reasoning?
- George Mason University · Microeconomics 306 · Walter E. Williams
Briefly analyze the following:
- George Mason University · Microeconomics 306 · Walter E. Williams
Give economic interpretation of the following excerpts from Exodus and Deuteronomy: Nonsense is forbidden!
- George Mason University · Microeconomics 306 · Walter E. Williams
“The advent of the one man bus involved more capital equipment: an automatically operated coin box and door control device - to name two of the capital goods that replaced the conductor.”
- George Mason University · Microeconomics 306 · Walter E. Williams
Evaluate the following statement:
- George Mason University · Microeconomics 306 · Walter E. Williams
Assume that you are a member of a minority group in some country and have reason to doubt that your property rights would be enforced and respected in the community.
- George Mason University · Microeconomics 306 · Walter E. Williams
Discuss the following statement: “In a competitive market the least-cost production techniques are revealed by entry and exit, while in public utility regulation they are revealed by commission rate hearings. It is easier to fool the commission than the market. Therefore whenever possible, competition should be permitted.”
- George Mason University · Microeconomics 306 · Walter E. Williams
“Debtors are exploited by creditors because a person who has to borrow is usually in distress and is willing to pay a very high price to get the loan. Unless laws were passed controlling the rate of interest, debtors would be forced to pay unreasonable rates of interest.” Is the analysis correct? Explain why or why not.
- George Mason University · Microeconomics 306 · Walter E. Williams
Both monopolists and purely competitive firms are assumed to behave as if they seek to maximize profits, yet monopoly is held to result in an inefficient allocation of resources as compared to pure competition. Explain. Marginal costs serve as a guide as to how much of a good product, while average variable costs help indicate whether to produce at all. Explain.
- George Mason University · Microeconomics 306 · Walter E. Williams
The National Teacher’s Federation, a teacher’s union, advocates a single salary scale wherein every teacher, regardless of specialty, gets the same salary his first year of teaching, with salary thereafter tied strictly to years of service. Who would suffer (why) and who would benefit (why) if that were made universal: Men or women? Negroes or whites? Superior or inferior teachers? Mathematics or physical-education teachers?
- George Mason University · Microeconomics 306 · Walter E. Williams
“On a proportional basis, there are too many Negroes and too few Jews among professional athletes. This shows that sports has finally overcome racial prejudice, it has not overcome religious prejudice.” Comment.
- George Mason University · Microeconomics 306 · Walter E. Williams
You are the absolute czar and head of a union of 1,000 plumbers in Austin, Texas. You have the absolute power to set the wage at which the plumbers will work. The economist that you have hired tells you that the demand for plumbers in Austin is , where is the number of plumbers employed and is their wage per hour. This demand function can also be written . If there are no other plumbers in Austin, what wage would you set if (a) you wished to achieve full employment at the highest possible wage; (b) you wished to maximize total payments to plumbers?
- George Mason University · Microeconomics 306 · Walter E. Williams
How is interest rate defined? Why is there a lower present value of goods to be delivered in the future? If in New York, state bonds paying $1,000.00 at maturity (one year hence) are selling for $650.00, and in New Jersey sell for $800.00, what are their respective interest rates? Describe the adjustments that you think will ensue.
- George Mason University · Microeconomics 306 · Walter E. Williams
Taxi fares in New York recently were increased by nearly 50%. Predict the effect on the price of taxicab medallions, the earnings of taxicab drivers and congestion in New York streets.
- George Mason University · Microeconomics 306 · Walter E. Williams
In the interest of conservation it has often been argued there must be government regulation of the extraction of natural resources such as timber and government regulation to protect endangered wildlife. Explain why and how, in a free market economy, these resources are already regulated and comment on the pitfalls to either form of regulation.
- George Mason University · Microeconomics 306 · Walter E. Williams
Economists Armen Alchian and Reuben Kessel have advanced the hypothesis that monopolists choose to satisfy more of their non-pecuniary aims than do perfect competitors. Consider the following aims: (a) exercising their preferences against certain minorities, (b) enjoying the good life with lush expense accounts for executives. What theoretical arguments could support this hypothesis? How might you test this hypothesis?
- George Mason University · Microeconomics 306 · Walter E. Williams
“If every employer hired its best qualified applicants for a job at every opportunity, the phenomenon of black poverty (as distinct from poverty) could be wiped out in ten years.” Do you agree/disagree? Comment.
- George Mason University · Microeconomics 306 · Walter E. Williams
You are given the following demand function for the firm:
- George Mason University · Microeconomics 306 · Walter E. Williams
If the price of prunes relative to the price of plums fell, what could you infer about the interest rate?
- George Mason University · Microeconomics 306 · Walter E. Williams
Is human life priceless? What evidence can you offer to support your contention?
- George Mason University · Microeconomics 306 · Walter E. Williams
Except for promotional purposes, and price wars, airfare rates to Europe are higher in the summer than in the winter. Coach class airfare from Philadelphia to Los Angeles is cheaper than coach class airfare to Des Moines. First class airfare is always higher than coach class. Moreover, airlines charge lower fares to those who book seats well ahead of time than those who wait until the last minute. Are these all examples of price discrimination? What additional information may be required before you can give a complete answer to this question? Explain.
- George Mason University · Microeconomics 306 · Walter E. Williams
Evaluate: “The fact that some airplanes collide is evidence there is ‘too little air traffic control’.” (Be sure to explain what too little might mean.)
- George Mason University · Microeconomics 306 · Walter E. Williams
Evaluate: “A bird in the hand is worth six in the bush.”
- George Mason University · Microeconomics 306 · Walter E. Williams
Explain the concept of externality. What does it have to do with the efficient allocation of resources?
- George Mason University · Microeconomics 306 · Walter E. Williams
Private property rights lead to one kind of resource allocation while communally held property rights lead to another. Explain. You may use examples.
- George Mason University · Microeconomics 306 · Walter E. Williams
Evaluate the following: The way to get people to keep future generations in mind as they make current decisions concerning scarce natural resources is to allow them to hold private property rights over these resources, which they can transfer at death to their heirs.
- George Mason University · Microeconomics 306 · Walter E. Williams
Why do market rates of interest rise whenever people expect increasing inflation in the future?
- George Mason University · Microeconomics 306 · Walter E. Williams
Why did Professor Williams invest additional resources to make this class an effective one? He could have received the same pay for doing considerably less work. Why didn’t you allocate the amount of resources necessary to earn an A in this class?
- George Mason University · Microeconomics 306 · Walter E. Williams
Give brief analysis to each of the following:
- George Mason University · Microeconomics 306 · Walter E. Williams
Evaluate the following: The laws of supply and demand cannot apply to the labor market because labor is not a commodity to be bought and sold like machines.
- George Mason University · Microeconomics 306 · Walter E. Williams
The supply curve for labor is , where is the market wage. The marginal revenue product curve for the firm is .
- George Mason University · Microeconomics 306 · Walter E. Williams
(a) Why will a person who has transferable (saleable) property rights in a business for which he is making decisions, be more influenced by the longer run effect of his decisions than if he did not have transferable property rights in the business?
- George Mason University · Microeconomics 306 · Walter E. Williams
“Long ago we stated the reason for labor organizations. We said that they were organized out of the necessities of the situation; that a single employee was helpless in dealing with an employer; that he was dependent ordinarily on his daily wage for the maintenance of himself and his family; that if the employer refused to pay him the wages that he thought fair, he was nevertheless unable to leave the employer and resist arbitrary and unfair treatment; that a union was essential to give laborers opportunity to deal on an equality with their employer.” This statement was made by Chief Justice Charles Hughes, of the Supreme Court of the United States in the case of United States v. Jones and Laughlin, 1937. Evaluate Chief Justice Hughes’ propositions for their meaning.
- George Mason University · Microeconomics 306 · Walter E. Williams
A large lake is stocked with excellent fish, but no one owns the fish or the lake. Only by catching the fish can you acquire ownership of the fish.
- George Mason University · Microeconomics 306 · Walter E. Williams
Evaluate the following quote from USA Today, March 22, 1988:
- George Mason University · Microeconomics 306 · Walter E. Williams
Give brief answers to each of the following:
- George Mason University · Microeconomics 306 · Walter E. Williams
Why might the existing firms in a cartelized industry prefer to be regulated by the government?
- George Mason University · Microeconomics 306 · Walter E. Williams
What is the problem with common property resources?
- George Mason University · Microeconomics 306 · Walter E. Williams
“Public policy is necessary to protect the average citizen from the power of vested interest groups. In the absence of government intervention, regulated industries, such as airlines, railroads, and trucking, would charge excessive prices. Products would be unsafe, and the rich would oppress the poor. Government curbs the power of special interest groups.” Comment saying why you agree or disagree with the accuracy of that statement.
- George Mason University · Microeconomics 306 · Walter E. Williams
In the “absence of unions, employers would be able to pay workers whatever they wanted.” True or false? Why?
- George Mason University · Microeconomics 306 · Walter E. Williams
Suppose that Florida migrant farm workers are effectively unionized. What will be the impact of the unionization on (a) the price of Florida oranges, (b) the profits of Florida fruit growers in the short run and in the long run, (c) the mechanization of the fruit picking industry and (d) the employment of fruit pickers?
- George Mason University · Microeconomics 306 · Walter E. Williams
Suppose you are contemplating the purchase of a mini computer at a cost of $1,000.00. The expected lifetime of the asset is three years. You expect to lease the asset to a business for $400.00 annually (payable at the end of each year) for three years. If you can borrow (and lend) money at an interest rate of 8 percent, will the investment be a profitable undertaking? Is the project profitable at an interest rate of 12 per cent? Provide numerical calculations in support of your answers.
- George Mason University · Microeconomics 306 · Walter E. Williams
A television newscaster said, “Janet Jones is $20 million richer today. She just won the Florida lottery, which will pay her $1 million per year for each of the next twenty years.” Is she really $20 million richer?
- George Mason University · Microeconomics 306 · Walter E. Williams
Some time ago, most of the major airlines issued student travel cards at a nominal price. These cards permitted college students to fly “space available” (that is, no reservations allowed) at substantial discounts. When this practice was in effect, some older non students were using the cards, and some students were insuring themselves available space by reserving seats for fictitious passengers who then do not show up for the flight.
- George Mason University · Microeconomics 306 · Walter E. Williams
Assume that the soft coal industry is a competitive industry and it is in long run equilibrium. Now assume that the firms in the industry form a cartel.
- George Mason University · Microeconomics 306 · Walter E. Williams
Assume that an industrial union’s primary purpose is to raise the wages of its members above the competitive level.
- George Mason University · Microeconomics 306 · Walter E. Williams
Suppose a frost kills a large portion of an orange crop, with a resulting higher price of oranges. It has been said that such an increase in price benefits no one since it cannot elicit a supply response; the higher price, it is said, simply “lines the pockets of profiteers.” Analyze this proposition. (Hint: be sure to focus on the rationing function of market price.)
- George Mason University · Microeconomics 306 · Walter E. Williams
The average wage rate of women is only 59% of that of men. This shows that women are paid just 59% as much as men for doing the same work. Evaluate this statement.
- George Mason University · Microeconomics 306 · Walter E. Williams
What is wrong with this way of thinking?
- George Mason University · Microeconomics 306 · Walter E. Williams
“Jobs are the key to economic progress. Unless we create more jobs, our standard of living will fall.” (True or false? Explain.)
- George Mason University · Microeconomics 306 · Walter E. Williams
State the law of diminishing returns. Then explain why you agree or disagree with the following statements. (You may use a graph with your answer.)
- George Mason University · Microeconomics 306 · Walter E. Williams
Give brief answers to each of the following:
- George Mason University · Microeconomics 306 · Walter E. Williams
Assume that the soft coal industry is a competitive industry and it is in long run equilibrium. Now assume that the firms in the industry form a cartel.
- George Mason University · Microeconomics 306 · Walter E. Williams
Suppose that Florida migrant workers are effectively unionized. What will be the impact of the unionization on (a) the price of Florida oranges, (b) the profits of Florida fruit growers in the short run and in the long run, (c) the mechanization of the fruit picking industry and (d) the employment of fruit pickers? Explain each answer.
- George Mason University · Microeconomics 306 · Walter E. Williams
Do the following comments reflect sound economic reasoning? Explain why or why not. (a) “I paid $200.00 for this economics course. Therefore, I am going to attend the lectures even if they are useless and boring.” (b) “Since we own rather than rent, housing does not cost us anything.” (c) I own 100 shares of stock that I can’t afford to sell until the price goes up enough for me to get back at least my original investment.” (d) “It costs to produce private education, whereas public schooling is free.”
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