Advanced Micro I – Williams Final Edition

1. 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)

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

Explain the meaning of this statement.

(#44, part 1)

 
 
 
 
 
 
 
 

3. 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)

 
 
 
 

4. 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)

 
 
 
 

5. 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)

 
 
 
 

6. Explain what Hayek might mean when he asserts that: β€œThe most significant fact about the price system is the economy of knowledge with which it operates.”

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

 
 
 
 
 

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

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

 
 
 
 

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

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

 
 
 
 
 
 
 

9. 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)

 
 
 
 

10. 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)