With this post the stock of old Chicago preliminary examinations for the M.A. and Ph.D. in economics transcribed for Economics in the Rear-view Mirror has grown by one to make it an even dozen.
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Previously posted prelim examinations at the University of Chicago:
Preliminary Exam (Money and Banking) 1956
Preliminary Exam (Money and Banking) 1959
Preliminary Exam (Price Theory) 1964
Preliminary Exam (Price Theory) 1969
Preliminary Exam (Macroeconomics) 1969
Preliminary Exam (Money and Banking) 1969
Preliminary Exam (International Trade) 1970
Preliminary Exam (Price Theory) 1975
Preliminary Exam (Industrial Organization) 1977
Preliminary Exam (History of Economic Thought) 1989
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ECONOMIC THEORY I
Preliminary Examination for the Ph.D. and A.M. Degrees
Winter Quarter 1957
WRITE THE FOLLOWING INFORMATION ON YOUR EXAMINATION PAPER:
Your Code Number and NOT your name
Name of Examination
Date of Examination
Results of the Examination will be sent to you by letter after results on all preliminary examinations have been received.
Answer all questions: Time: Four hours.
Do section I of the examination on this paper and turn it in to the proctor with the rest of your examination. You are to do sections II-VII separately.
- Indicate whether each of the following statements is true (T), false (F), or uncertain (U). Explain briefly the basis for your answer.
- _____. If the market elasticity of demand for peaches is -2, a peach producer whose output accounts for 1/20th of the total supply of peaches will be faced by a demand function of elasticity -40.
- _____. If a constant amount of carpenters’ services is required per unit of housing constructed, and the elasticity of demand for housing is -1, the elasticity of demand for carpenters’ services used in housing must be less (in absolute value) than unity.
- _____. If the production possibilities for wire can be represented by a Cobb-Douglas production function, and the wire industry is competitive, a rise of 10 per cent in the wages of wire-workers will lead to a reduction of 10 per cent in their employment.
- _____. The elasticity of demand for a group of commodities with respect to the average price of the group can never be larger in absolute value than the largest of the individual price elasticities of the commodities which comprise the group.
- _____. If total consumer expenditures are the same before and after a tax, then an excise tax on a consumer good of elastic demand will lead to an increase in consumer spending on other consumer goods, while an excise tax on a consumer good of inelastic demand will lead to a decline in consumer spending on other consumer goods.
- _____. A tax of 10 per cent per year on the rental value (actual or imputed) of all land will in the long run lead to a lowering of the marginal productivity of labor in agriculture.
- _____. A technological advance opening up widespread possibilities for new investment in the electronics industry at very high rates of return will tend to lower the real value of the existing stock of residential housing in the United States.
- _____. A supply curve passing through the origin has an elasticity equal to unity.
- _____. Given certainty, no firm would hold inventories.
- _____. A negatively sloping supply curve of labor implies a positively sloping demand curve for leisure.
- _____. It is impossible to derive a supply function for a monopolist.
- _____. A legally enforced minimum wage for a particular occupation may increase employment in that occupation.
- _____. Wage rates rise while interest rates remain the same. It follows that the ratio of capital to labor will increase.
- _____. Engel’s laws are due to Friedrich Engels.
- “It is too obvious for argument that a single employee bargaining with a great corporation, or even with a moderately small employer, is under a disadvantage, except perhaps in time of serious labor shortage”. (Arthur Larsen, A Republican Looks at his Party, p. 125)
Analyze, being sure in the process to discuss the concepts of “bargaining disadvantage” and “labor shortage”. - Derive a demand function for a factor of production. What does it depend on? What things are held constant in the derivation?
- a) What was Malthus’ theory of population? In answering, distinguish explicitly between the two variants of his theory, according to the character of the restraints on population.
b) Tell how equilibrium is established under each variant.
c) What effect did the theory have on economic theory? - In the analysis of supply, an important role is played by a fourfold classification of economies or diseconomies of production: internal and external, each of these cross-classified as pecuniary and technical.
- What does each of the four concepts mean and what role does it play in the analysis of supply?
- For each of the four concepts, what would be its counterpart in the analysis of demand? If you can, illustrate by example each type of economy, each type of diseconomy.
- Why is so much more importance attached to these concepts in the analysis of supply than in the analysis of demand?
- “The interest rate measures the rate of time-preference. Therefore, in a community, the members of which are as anxious to provide for the future as for the present, the rate of interest will be zero. But the rate of interest also equals the marginal productivity of capital. It follows that in such a community the marginal productivity will be zero”.
Discuss the validity of this argument. - The U.S. government currently guarantees a large fraction of mortgages on newly-constructed houses through the Federal Housing Administration and the Veteran’s Administration. The government guarantee naturally makes these more attractive than non-guaranteed mortgages and so leads to their being available at a lower rate of interest. Recently there has been a decline in residential building. Representatives of the industry have suggested that one means of stimulating building would be to extend the government guarantee to mortgages on existing houses. They claim that the higher cost of mortgages on such houses inhibits their sale and thus prevents individuals currently owning houses from coming into the market for new houses.
Analyze the effect that the enactment of this proposal would have on the rate of construction of residential housing. Do not discuss the desirability as a matter of public policy of either the existing guarantees or the proposed extension.
Source: Hoover Institution Archives. Milton Friedman Papers, Box 76, Folder 2 “University of Chicago ‘Economic Theory’”.
Image Source: Social Science Research Building. University of Chicago Photographic Archive, apf2-07466, Special Collections Research Center, University of Chicago Library.