Advanced Micro I – Williams Final Edition

1. 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.



2. 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)


3. 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)


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

Enter your answer as a single capitalized letter.







(2014 #1)

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

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


7. 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)


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?



9. Give a brief answer to the following:

Cost minimization is the general criterion of economic behavior.*

*Hint: Williams implicitly assumes costs are accounting costs.



10. Give a brief answer to the following:

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