Harvard. Undergraduate Departmental Examination and Essay Questions, 1942

 

 

The next post will provide transcriptions of three division special (i.e. field) examinations from 1942.

The 1939 departmental examination and  essay questions have been posted earlier.

______________________

DIVISION OF HISTORY, GOVERNMENT, AND ECONOMICS
Department of Economics
May 1, 1942

ESSAY PAPER
(One hour and a half)

Candidates for honors may write on ONE topic only. Others may, if they prefer, write on TWO topics. Please note on the front cover of the bluebook the number of each topic upon which you write.

1. Economic imperialism.
2. The pre-requisites of lasting peace.
3. The economist who has most influenced your thinking.
4. Some unsettled questions of economic science.
5. Welfare economics.
6. The relation of economics to sociology and political science.
7. The distribution of wealth and income.
8. The classical economists and their legacy.
9. The nature and significance of general equilibrium analysis.
10. Economic warfare.
11. If Great Britain loses her empire.
12. What killed laissez-faire?
13. “The rise of political centralism is largely the product of economic centralism.”
14. The relations and roles of the economic interests, and the social and cultural traditions, movements, and ideals, which are in conflict in the war.
15. The American war effort and the profit system.
16. Government controls which the American economy requires during the war, and those which it will require in the period of post-war adjustment.
17. The applicability of traditional economic theory in explaining the course of economic life in totalitarian states.
18. The future of capitalism.
19. “The claim of economics to be a true science, like the modern physical sciences, must be given up as untenable.”
20. Planned economies and human liberties.
21. The value of training in economics, for success in business, and for good citizenship.
22. “The physiologist’s task is not the physician’s; analysis and therapy are different; and economists, like physiologists, should confine themselves to explaining what happens, and leave the giving of advice to others.”

Source:  Duke University. David M. Rubenstein Rare Book & Manuscript Library. Economists’ Papers Archive. Papers of Randall Hinshaw. Box 1, Folder “Schoolwork, 1940s”.

___________________

DIVISION OF HISTORY, GOVERNMENT, AND ECONOMICS
Department of Economics
May 4, 1942

DEPARTMENTAL EXAMINATION
(Three hours)

Answer SIX questions; at least ONE question must be answered in each part, but not more than THREE questions may be taken in Part II. A senior may not take more than ONE question in that section of Part II which covers his special field.

PART I

1. Define: elasticity of demand, unit elasticity, elastic demand, inelastic demand. Say weather, and explain why, you would expect the demand for each of the following commodities (in normal times) to be elastic or inelastic: automobiles, milk, tobacco, fur coats, window glass, oriental rugs, quinine, coal.
2. Suppose that industries A, B, and C are all “purely competitive”, and that A has constant costs, B increasing costs, and C decreasing costs, for increasing outputs. If all three of these industries experience rapid, marked, and lasting increases of the public’s demands for their products, what will be (a) the immediate and (b) the ultimate effects upon the prices of the three different products? Explain your answers, and illustrate each case by the appropriate diagram. If now a cost-reducing invention (new method or machine) is generally adopted in each industry, show on your diagrams the effects of this on their cost conditions, outputs, and prices, and explain.
3. Suppose a firm to be operating under these conditions:

Its total fixed cost is $1000 per day.
Its total operating cost for 1 unit output per day is $1000.00; for 2 units, $1800.00; for 3, $2550.00; 4, $3400.00; 5, $4500.00; 6, $6600.00. It can sell at price $1800.00, 1 unit; at $1500.00, 2 units; at $1250.00, 3 units; at $1100.00, 4 units; at $1000.00, 5 units; at $925.00, 6 units.

Infer from those figures, and draw on a diagram (as smooth curves) this firm’s average total unit cost, marginal cost, demand, and marginal revenue curves.
Now show on your diagram, and explain, the price and output required to maximize the firm’s profits.
Now assume “free entry” to the field, and that new competitors of this firm appear.
Show on your diagram, and explain, the ultimate effects of the new (increased) competition on this firm’s demand curve, output, average total unit cost, selling price, and profits.

4. Explain as fully as you can, in terms of the relevant conditions of demand, supply, and marginal productivity, the present high wages of skilled workers in American war industries.
   To what extent, and how, do you think the efforts of trade unions make these wage-rates higher than they would be otherwise?
5. In what principal ways do you think the war is affecting and likely to affect, while it lasts, the aggregate demand for and supply of capital and the level of interest rates within this country?
   What developments in the same respects do you think are most likely in the post—war period? Explain fully.
6. Explain and discuss the significance of each of the following: total utility, law of diminishing utility, average and marginal utility, and consumers’ surplus.
7. How would competition, if universally “pure”, tend to allocate resources, in a state of equilibrium of the whole economy?
   How is the equilibrium allocation altered by general prevalence of “monopolistic competition”?
   Explain concisely.
8. Suppose that economic conditions in a country over a certain decade undergo the following changes. (1) The country’s population increases rapidly, while no additions are made to its territory or known natural resources. (2) Technological progress in all branches of production is steady and substantial; all innovations are capital-using, labor-saving inventions; physical outputs per man-hour of labor increase substantially. (3) A constant, rather high percentage of the national money income is annually saved and invested within the country. (4) Credit expansion is continually greater than the increase of total physical production, hence the price-level rises throughout the decade.
   Explain and discuss the probable, separate and joint effects of those developments on the absolute and relative shares of the national, real income respectively allotted, at the end as compared with the beginning of the decade, to (real) wages, economic rent, interest, and business profits. If you need to make assumptions more definite than those stated above, or additional assumptions, in order to reach definite conclusions, make clear the uncertainties in the problem as stated, and resolve them by explicit assumptions chosen as you please, at appropriate points in your discussion.

 

PART II
A
Statistics and Accounting

9. Is it possible to devise an “ideal”, all-purpose, formula for price index numbers? Why or why not?
10. What, in your judgment, are the greatest dangers that have to be guarded against in applying statistical methods to the available data of economic life?
11. “Currently practiced accounting methods lead almost invariably to either overestimation or underestimation of true net earnings.” Explain carefully, indicating what is meant by “true net earnings” and why accepted accounting principles may lead to their misrepresentation. Do you think that in wartime, net earnings are likely to be overstated or understated?
12. Answer concisely the following questions: (a) A corporation issues $100,000 par value stock to the promoters for nothing. In order to make the totals of the balance sheet equal, an item of “goodwill $100,000” is placed on the asset side. Assuming there is no reasonable ground for considering the “goodwill” to be actually valuable, how would you correct the balance sheet? (b) The amount of fixed assets – buildings and machinery – is less at the end of the year than at the beginning. What other changes would you expect to find on the balance sheet? Why? (c) In case a reappraisal of fixed assets shows a value in excess of value and it is desired to bring the appreciation into the books, how may this be done?

B
Modern Economic History

13. What role would you assign to the National Banking System in the pattern of American business fluctuations from 1870 to 1914?
14. Describe and explain the development of American tariff policy during the 19th century.
15. Argue for or against the proposition that the Nazi economy is no more than the logical outcome of German economic policy from the time of Bismarck on.
16. “The depression (1876-86) is, indeed, the watershed between the era of British industrial supremacy in the era of international competition.” Discuss.

 

C
Money and Finance

17. Imagine that someone with no knowledge of economics asks you to explain to him, fully and clearly, why as an element of war finance government borrowing from the banks is peculiarly “inflationary”; and write out the explanation you would give.
18. “Since government spending has become the main regulator of the volume and tempo of economic activity, Federal Reserve policy has become an academic subject of no real importance.”
19. In a world at peace, with international trade proceeding normally, but with all countries on independent “paper standards” and exchanges “free” (with no fixed parities”, a position of general equilibrium and stable exchange rates has been reached. Now country A embarks, alone, on an internal monetary expansion which raises its price level.
    Trace and explain what effects, if any, this will tend to have on the balances of payments of A and other countries, foreign exchange rates, international transfers of products, factors, and “purchasing power”, and price levels in other countries. At what point, and how, will a new position of equilibrium be reached?
20. “In the development of trade between an industrial nation, A, and an agricultural nation, B, both nations will gain by the trade, but the division of the gain will become unequal, in favor of A. The elastic demand for A’s products in B, and the inelastic demand for B’s products in A, will cause the terms of trade to shift in favor of A, as production in both countries in the trade between them expand.”
    Give a full and careful explanation of the concepts, assumptions, and reasoning suggested, and state any criticisms or qualifications that occur to you.
21. Discuss the meaning and validity of the statement that a general sales tax is “regressive”; and the principal arguments for and against the view that this type of tax, even if undesirable in peace times, is peculiarly appropriate in wartime.
22. “Our immense and upward-zooming federal debt is a prelude either to national bankruptcy, or else to socialism.”

 

D
Market Organization and Control

23. Sketch the background, provisions, and chief consequences of the Sherman Anti-Trust Act.
24. Is it possible for a Board of Directors to pursue a dividend policy which will consistently harmonize the interests of the corporation, its stockholders, and society as a whole? Explain.
25. What are the methods which may be adopted to control war-time profits? What policy do you favor in this respect and why?
26. “In the pricing of electrical energy no case can be made out on economic grounds for differential charges unless they are likely to lead to an improvement in the load factor, i.e., To a more uniform distribution of demand through time.” State your reasons for agreeing or disagreeing with this proposition.
27. “Only a socialist has a right to complain about crop-restriction and price-raising in the field of agricultural production.” Discuss.
28. “There seems to be little doubt that the complete ‘trustification’ of the economy, with the relative stability of prices which would follow therefrom, would go a long way toward eliminating business fluctuations.” Discuss.
29. “Price stability is prima facie evidence of monopoly.” Discuss.

 

E
Labor Economics and Social Reform

30. Outline and defend what you would advocate as the best national war-time policy in regard to wages, and whatever else you think must be controlled in order to control wages effectively.
31. What principal, lasting effects do you think the war is likely to have on the American labor movement – union structures, strength, status, and policies? Explain your predictions and the evidence and reasoning on which you base them.
32. “The current outcry against federal centralization of unemployment insurance, and in favor of ‘states rights’ in this field, is without merit, and a mere device of employer interests to limit the development of unemployment insurance and keep it as innocuous as possible.”
33. “American labor unions are deluding themselves in blaming only the false propaganda put out against them by unprincipled opponents, for the better anti-union feelings of some millions of middle and lower-middle-class Americans. Real faults of union leadership and policy have done a great deal to cause and justify this public hostility, and the unions in their own interests can and must assuage it by putting their own houses in order.”
    Discuss this, as far as you can, in terms of concrete, illustrative situations and evidence of which you have some knowledge.
34. “The Marxian theory that all property-incomes, or non-labor incomes, originate in exploitation of labor, is entirely compatible with the ‘marginal productivity’ theory of income distribution.” Explain and discuss.
35. Outline, and discuss critically, what you regard as the logical, Marxist explanation of the origins and issues of the present war.
36. What do you think American Labor, in supporting the war-effort, should put first among its “peace aims”, or aims in respect of the post-war settlement? Explain and defend your answer.

 

PART III

37. “Economics can either explain the quasi-automatic operation of a true free enterprise economy, or devise a blue-print for rational planning in the socialist economy. But in a half-way house like our present society, where both private and public decisions must respond more often to political than to economic facts, economics can neither explain events nor guide public policy.”
38. “After the last war, the reaction of business and the public against the war-time government controls gave a new lease of life to laissez-faire, with disastrous results; and there is danger that a like relapse will occur at the end of this war.”
39. “The proper work of the economists, in helping to solve the problems of industry and society, may be said to begin where that of the engineers or technicians ends.”
40. “If the opportunity for the employment of idle men and idle money is to be found in a free, private enterprise system then, obviously, we must find a way to stimulate new, private enterprises by encouraging the investment of private savings in them.”
41. “The causes which bring trade barriers into existence and produce centralism in every form of economic activity must be attacked if a real system of free enterprise is to be re-established.”
42. “To maintain and improve labor’s position economically is the traditional task of the unions. Today, not only the growth but even the existence of the unions has become in large measure a political problem.”
43. “The last war, in its impact on the American economy, produced war-time overexpansion and post-war depression chiefly in agriculture. This time, it is the industrial sector of our economy which is threatened with that sequence, on a much more disastrous scale.”
44. “The patriots who denounce, in war-time, all self-interested demands or actions on the part of business, labor, or farm groups, generally do not recognize the fact that rivalry of all interest-groups over distribution of war-time prosperity is inevitable under our profit-system, and cannot be eliminated unless we are willing to replace that system entirely, while the war lasts, with a governmental dictatorship of all economic life as complete is that now practiced in Germany, Japan, and Russia.”

Source:  Duke University. David M. Rubenstein Rare Book & Manuscript Library. Economists’ Papers Archive. Papers of Randall Hinshaw. Box 1, Folder “Schoolwork, 1940s”.

Image Source: John Harvard Statue from the Tichnor Brothers Collection of postcards. Boston Public Library, Print Department.