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The economist Norman M. Kaplan’s papers includes the reading list, two exams, and over 200 pages of his clear and legible lecture notes from Oskar Lange’s graduate theory course on imperfect competition at the University of Chicago. I have already posted the reading list for the Autumn quarter of 1941. This posting consists of the course exam questions for both 1941 and 1944.
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The course description in the 1944-45 course announcements
[identical to course description in 1941-42 announcements]
- Imperfect Competition.—A study of price formation and production under various transitional forms between perfect competition and pure monopoly, such as monopolistic and monopsonistic competition, noncompeting groups, oligopoly and bilateral monopoly. The problem of equilibrium under such forms. Noncompeting groups and social structure. Application of the theory to the study of distribution of incomes, collective bargaining, excess capacity, price rigidity, and business cycles. Imperfect competition and economic policy. Prerequisite: Economics 209 or equivalent. Sum[mer] 2d hf 1st T and 1st hf 2d T [C. ½ C in 2d hf 1st T]: MWF 1-3; Autumn, TuThS 10; Lange.
Source: University of Chicago. Announcements of the College and the Divisions for the Sessions of 1941. Vol. XLIV, No. 8 (May 15, 1944), p. 275.
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ECONOMICS 307
Autumn, 1941
(Answer briefly)
I.
The following table shows the demand (sales) schedule and the total cost schedule from a monopolist producing a patented medicine:
|
Output |
Price (per unit) at which output can be sold (in dollars) |
Total cost |
|
0 |
10 |
1000 |
|
100 |
9 |
1200 |
|
200 |
8 |
1400 |
|
300 |
7 |
1600 |
|
400 |
6 |
1800 |
|
500 |
5 |
2000 |
|
600 |
4 |
2200 |
- Calculate the total revenue in the marginal revenue schedules
- Calculate the marginal cost, average cost and average variable cost schedules. Indicate the fixed cost
- Find the most profitable output and price. Showed that it is not affected by a change in fixed cost
- Calculate the net profit.
II.
- Explain the conditions under which monopolistic and monopsonistic price discrimination is (a) possible, (b) advantageous to the firm
- Assuming that the firm finds it possible and advantageous to practice monopolistic or monopsonistic price discrimination, indicate the relationship between (in the case of monopoly) the prices charged in the different markets and the respective elasticities of demand, or (in the case of monopsony) between the prices paid in the different markets and the respective elasticities of supply
- What can be said about the social desirability of monopolistic price discrimination from the point of view of welfare economics?
III.
- Explain by means of a diagram the formation of the wage-rate under conditions of monopsony in the labor market. What is the relation of the wage rate to the value of the marginal product of labor?
- Explain and discuss critically the concepts of “monopolistic exploitation” and of “monopsonistic exploitation” of labor
- Give a diagrammatic account of the effects of trade-unionism (with uniform wage-rates) and of control of monopoly upon the demand for labor by a firm (or industry).
- Indicate on the diagram the wage-rate you would impose if you were a government arbitrator. Discussed her decision in terms of (a) the level of employment, (b) the principles of welfare economics, (c) social justice (indicate your criteria of “justice”).
IV.
- Discuss the fundamental difficulty of the theory of oligopoly and explain how it is solved in (a) Chamberlin’s theory of monopolistic competition, (b) on the basis of rules of group behavior endowed with the dignity of ethical norms
- Discuss the significance of the kinked demand curve sub (1b) with regard to (a) price rigidity, (b) the functional distribution of incomes
V.
Discuss by means of a diagram the case of “service competition” between oligopolistic firms bound by a price agreement. Show (a) how the output of a firm is determined in this case and (b) the difference between this case and that of atomistic competition.
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ECONOMICS 307
December, 1944
I.
Describe Chamberlin’s theory of monopolistic competition and explain:
- the “excess capacity” obtaining when the firm and the group are both in equilibrium; distinguish between short and long-period “excess capacity”; which of the two presents a waste of resources from the social point of view and why.
- What assumptions about other firms’ reactions are made in Chamberlin’s theory.
- What criticisms can be made of Chamberlin’s theory.
II.
- Explain by means of a diagram the formation of the wage-rate under conditions of monopsony in the labor market. What is the relation of the wage rate to the value of the marginal product of labor?
- Explain and discuss critically the concept of “monopolistic exploitation” and of “monopsonistic exploitation” of labor.
- Give a diagrammatic account of the effects of trade-unionism (with uniform wage-rates) upon the demand for labor by a firm (or industry).
- Indicate on the diagram the wage-rate you would impose if you were a government arbitrator. Discuss your decision in terms of (a) the level of employment, (b) the principles of welfare economics, (c) social justice. (indicate your criteria of “justice”).
III.
Explain the reasons which lead under oligopoly to formation of a conventional price and state:
- Why is the demand curve likely to have a “kink” at the level of the conventional price;
- What is the shape of the marginal revenue curve in this case;
- Within what limits will a shift of the marginal cost curve leave price and output unaffected (illustrated by diagram);
- What bearing has this upon the problem of trade-unionism and wage-fixing.
IV.
“Total output is maximized when the ratios of the marginal productivities of any two factors are the same in each industry.”
- Explain what is meant in this context by “total output being maximized.”
- Give a simple numerical illustration of the theorem.
Source: University of Chicago Archives. Norman M. Kaplan Papers, Box 2, Folder 7.
Image Source: Oskar Lange monument at Wroclaw University of Economics. Wikimedia Commons.