Advanced Micro I – Williams Final Edition

1. State whether the following is true or false and explain your response:

Existing firms in a cartelized industry prefer to be regulated by government.

 
 
 
 
 
 
 

2. Give a brief answer to the following:

Collusions have the natural tendency to break down.

(#40.a)

 
 
 
 
 
 

3. 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)

 
 
 
 

4. 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)

 
 
 
 

5. 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)

 
 
 
 
 

6. 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)

7. 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)

 
 
 
 

8. Give a brief answer to the following:

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

(#40.c)

 
 
 

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. 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)