Advanced Micro I – Williams Final Edition

1. Do externalities offer unambiguous proof of market inefficiency or is it possible for externalities to be consistent with market efficiency?*

*Hint: Professor Williams takes the mainstream view that a situation is efficient iff it is pareto-optimal.

(#44, part 2)

 
 
 
 

2. Which of the following images is a graph of the standard intertemporal 2-period model?

Enter your answer as a single capitalized letter.

A

econ-graph-6

B

econ-graph-2

C

econ-graph-9

(2014 #1)

3. Give a brief answer to the following:

Laissez-faire capitalism encourages deceitful advertising, dishonesty, and faithlessness.

(#40.c)

 
 
 

4. Give a brief answer to the following:

Collusions have the natural tendency to break down.

(#40.a)

 
 
 
 
 
 

5. Is the following statement true, false, or uncertain? Explain.

A monopolist will never set price and quantity at a point where the demand is price-inelastic.

(2014 #3.a)

 
 
 
 

6. Give a brief answer to the following:

Cost minimization is the general criterion of economic behavior.*

*Hint: Williams implicitly assumes costs are accounting costs.

(#40.b)

 
 
 
 

7. True or false: Cost curves are monetized reciprocals of product curves? Explain.

(#76, #104, 2014 2.b)

 
 
 
 

8. 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?

(#45)

 
 
 
 
 
 
 

9. Atomistic markets are supposed to permit the achievement of Pareto optimality where externalities are absent.

Explain the meaning of this statement.

(#44, part 1)

 
 
 
 
 
 
 
 

10. Some discount stores advertise that they can sell for less because they buy directly from the factory and sell to the consumer, thus eliminating middlemen. What is the flaw in that reasoning?

(2007 #4.a)