The Macroeconomics examination questions for the economic theory general examinations of May and September at M.I.T. have also been transcribed and posted.
Note: S.I.M. = School of Industrial Management
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From the 1961 Economics Graduate Program Broschure
[boldface emphasis added]
Major Program and General Examinations
Work taken in the Department of Economics and Social Science for the doctorate in economics is divided—broadly speaking—into two separate options: economics and industrial relations. But there is considerable overlap between the two.
All students in both options are examined five fields. Among the fields presently available are the following: economic theory, advanced economic theory, monetary and fiscal economics, industrial organization, economic development, international economics, economics of innovation, labor economics and labor relations, personnel administration, human relations in industry, statistical theory and method, and economic history. Each student selects one field as having primary importance for this professional career; ordinarily this is the field in which he writes his dissertation, though exceptions may be made. The remaining four fields are designated secondary fields. One of the five fields must be economic theory.
Students are also required to have at least a minimum knowledge of statistics and economic history. This minimum is presently interpreted to mean one semester of work in each at the graduate level. Candidates who present statistics or economic history as a primary or secondary field normally take two or three semester subjects in the field and automatically satisfy the requirements in that area.
Students may qualify in one of the secondary fields through course work only, provided that they receive a mark of B or better in two subjects. Students are examined in writing in the remaining four fields during an eight-day period (Monday, Wednesday, Friday, and Monday). The theory examination is four hours long (divided roughly between microeconomics and macroeconomics), while the other three are each three hours long.
Following these written examinations, the student takes a two-hour oral examination which covers theory, his primary field, and one secondary field.
Source: Excerpt from Graduate Economics Program Brochure, 1961. MIT Archives, Department of Economics Records, Box 2, Folder “Department Brochures”.
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GENERAL EXAMINATION IN ECONOMIC THEORY
Part I—Microeconomics—Two Hours
[May 22, 1961]
Economics Candidates: Answer any FOUR questions (thirty minutes each).
S.I.M. Candidates: Answer any TWO questions (thirty minutes each).
- Within the framework of static, partial-equilibrium theory, indicate under what circumstances advertising will reduce product prices in the long run, (a) if the advertiser is a simple monopolist, (b) if the advertisers are members of a large, perfectly symmetrical, Chamberlinian group of suppliers of differentiated products (the number of firms being large enough to rule out oligopolistic relationships, and variable in accordance with a long-run-equilibrium condition of zero profit for all firms).
- How is a firm’s demand schedule for a particular factor of production derived (a) when that factor is the only variable one, and (b) when the quantities of all factors are variable? Show which of these demands is, if anything, the more elastic.
- The demands for two products are: q1 = q2 = 54 – p1 -p2. How would you characterize their relationship? If they are produced by separate sellers at constant average costs of c1 = 12 and c2 = 6, respectively, calculate each man’s equilibrium price, quantity, and profit under each of the following conditions:
- Each seller assumes that the other’s price is a constant;
- The second seller behaves that way and the first seller realizes that he does;
- Both sellers maximize their joint profit and share it equally.
- Two countries can produce food (F) and clothing (C) with labor (L) as the only factor of production. Country A has 20 billion units of L, each of which can produce either 5 units of F or 2 units of C. Country B has 10 billion units of L, each of which can produce either 8 units of F or 6 units of C. Everyone always spends half of his income on F and the other half on C. In a purely competitive equilibrium with balanced trade between the two countries (and no transportation costs), what is the effect on the quantities of F and C produced and consumed in each country? Could either country benefit by imposing a tariff on the imported good?
- What are the various reasons why a free-private-enterprise economy may fail to allocate its resources in an optimally efficient way? Explain.
- Discuss the roles of “real” and “monetary” elements in a satisfactory theory of interest. Is it logically possible to fashion an interest theory exclusively in terms of one or the other of those elements? Explain.
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GENERAL EXAMINATION IN ECONOMIC THEORY
Part I—Microeconomics—Two Hours
[September 18, 1961]
A. Answer any TWO of the three questions (40 minutes each).
A.1. Choose one theory of oligopoly. State its principal assumptions and conclusions and criticize them.
A.2. “The fact that a position on the contract curve is always better than one off it implies that we should move toward a situation of perfect competition.” Discuss.
A.3. What changes must be introduced into the conventional theory of the household to take account of the fact of capital?
B. Answer all three questions.*
B.1 Suppose that the coal industry is perfectly competitive. A certain coal-mining machine uses coal for fuel physically identical to that which it mines. What is the numerical value in equilibrium of the marginal product of the coal burned in the mining of more coal? Why? Are there any difficulties with the answer if explicit account is taken of the fact that coal production takes time?
B.2 Are demand curves faced by monopolists generally inelastic? Why or why not? How about their supply curves?
B.3 “In long-run equilibrium, a perfectly competitive firm which gives each unit of each factor that factor’s marginal physical product will precisely exhaust its own output.” Comment.
*Hint about the examiner’s preferences: Two carefully thought-out, good answers are better than three hurried, incomplete and sloppy answers. If you give good answers to any two of the three questions in Part B, don’t worry (about Part B).
Source: Duke University. David M. Rubenstein Rare Book and Manuscript Library. Evsey D. Domar Papers, Box 16, Folder “Ph.D. Examinations, Microeconomics”.