Advanced Micro I – Williams Final Edition

1. Give a brief answer to the following:

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

(#40.c)

 
 
 

2. Is the following statement true or false? Explain.

Price discrimination tends to be more common in the sale of services than in the sale of manufactured goods.

(2014 #3.c)

 
 
 
 

3. Explain what Hayek might mean when he asserts that: “The most significant fact about the price system is the economy of knowledge with which it operates.”

(#97.a, 2014 #3.b)

 
 
 
 
 

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

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

 
 
 
 

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. Is the following statement true or false? Explain your answer.

If you were a visitor in some underdeveloped country in which all lending and borrowing are effectively prohibited there would be no way to tell whether there were changes in the interest rate.

(#92, 2014 #2.c)

 
 
 
 

7. Give a brief answer to the following:

Collusions have the natural tendency to break down.

(#40.a)

 
 
 
 
 
 

8. Give a brief answer to the following:

A person who loses his job through no fault of his own is also unemployed thereafter through no fault of his own.

(#40.d)

 
 

9. 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: “The cost of running a car for one trip on this line is about $50 regardless of the number of passengers. So the per passenger cost is about 25¢ at rush hour but rises to $5 per passenger in off peak hours. Consequently, we had better discourage off-peak hour business.” Explain the fallacy.

“Commutation tickets” sold by some transit systems (reduced-price, multiple-ride tickets) are predominantly used in rush hours. Are such tickets a good idea?

(#42)

 
 
 
 
 
 
 

10. 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)