Advanced Micro I – Williams Final Edition

1. 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)

 
 
 
 
 

2. 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)

 
 
 
 

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

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

 
 
 
 

4. Give a brief answer to the following:

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

(#40.c)

 
 
 

5. 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)

 
 
 
 

6. 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)

 
 
 
 

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

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

 
 
 
 
 
 
 

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

Explain the meaning of this statement.

(#44, part 1)

 
 
 
 
 
 
 
 

9. 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)

 
 
 
 

10. 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)