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Chicago. Economic Theory Prelim Exam for PhD and AM, 1960

 

The economic theory  preliminary examination committee for the summer quarter of 1960 at the University of Chicago consisted of Milton Friedman (chairman), Martin J. Bailey and Lawrence Fisher. 

Previous posts with University of Chicago preliminary examinations for Ph.D. and A.M.  degrees:

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 (Old Rules)
Preliminary Examination for the Ph.D. and A.M. Degrees
Summer Quarter 1960

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.
Answer all questions. Time: 4 hours.

 

  1. [22 points, 2 each] Define briefly the following terms and indicate their use in economic theory:
    1. Backward bending supply curve
    2. Giffen effect
    3. Composite demand
    4. Elasticity of substitution
    5. Exhaustion of product
    6. Marginal value product
    7. Sunk costs
    8. Rent
    9. Firm
    10. Present value
    11. Rate of time preference
  2. [10 points] Describe the cost curves for an individual firm, explaining the relation between short-run and long-run curves, average and marginal cost curve. Explain the equilibrium of the firm for various market conditions of competition.
    b. [5 points] Describe the demand curves on the part of the individual firm for factors of production under various market conditions of competition.
    c. [5 points] Demonstrate that (a) and (b) are fundamentally translations of one another.
  3. [15 points] The U.S. Steel Corporation produces about one-third of the total ingot steel production in the United States (and a similar proportion of mill shapes and other forms of steel sold to steel-using industries). If the price elasticity of demand for steel is -0.5, what is the minimum absolute value of the elasticity of demand facing the U.S. Steel Corporation? What is the maximum absolute value? What can you conclude, without further information, about the monopoly power of the U.S. Steel Corporation? What further information, if any, would be relevant, and why?
  4. It is sometimes alleged that unionized firms are not injured by competition with non-union firms in the same industry because the presence of the union wage scale and working conditions enables the firm to obtain better quality labor, to have better labor morale and labor relations, etc.
    1. [10 points] Analytically, are these arguments well-founded? Discuss.
    2. [10 points] What data would you need on union and non-union firms to confirm or reject these arguments as an empirical proposition? In particular, would you use comparative output per man-hour, unit labor costs, or what? Why one and not another?
  5. A consumer buys in perfectly competitive markets, spending all of his income. Over a period of time his income changes and prices change, but it is our hypothesis that his tastes do not change.
    1. [10 points] Assuming no price-income situation was every exactly repeated, what possible behavior on his part, if any, could contradict our hypothesis? Why?
    2. [10 points] If the hypothesis is not contradicted, and if we then assume it to be correct, can we also assume that his indifference curves are everywhere convex to the origin? What possible behavior on his part, if any, could contradict the assumption of convexity to the origin? Why?
  6. [15 points] What are Marshall’s four propositions on derived demand? What subsequent contributions have been made concerning these propositions? In the light of these contributions, how would the propositions now be correctly and fully stated?
  7. [20 points] Write a brief essay on TWO of the following men and their contributions to economics:
    1. Hume
    2. Dupuit
    3. Von Thünen
    4. Menger
    5. Jevons
    6. Edgeworth
    7. Taussig
    8. Mitchell

 

Source: Hoover Institution Archives. Milton Friedman Papers. Box 76, Folder 2 “University of Chicago ‘Economic Theory’”.

Image Source: Milton Friedman. University of Chicago Photographic Archive, apf1-06238, Special Collections Research Center, University of Chicago Library.