One oddity in the economic theory preliminary examination from the summer quarter of 1956 transcribed below is that the True-False-Uncertain section consisted of 23 questions for a total of 140 points.
The mimeographed copy of the exam was fished from the papers of Zvi Griliches (U. Chicago Ph.D., 1957) at Harvard University Archives.
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Previously transcribed and posted Preliminary and Field Exams from the economics graduate program of the University of Chicago
Note: The chronological ordering of quarters at the University of Chicago during a calendar year goes Winter, Spring, Summer, Autumn. For this reason the following is arranged chronologically.
- Economic Theory I and II. Summer 1949
- Economic Theory I and II. Summer 1951
- Economic Theory I and II. Summer 1952
- Economic Theory I and II. Winter 1955
- Economic Theory I. Summer 1955
- Money and Banking. Summer 1956
- Economic Theory. Winter 1957 [Friedman copy]
- Economic Theory. Winter 1957 [different Griliches copy]
- Economic Theory. Winter 1958
- Money and Banking. Summer 1959
- Economic Theory (Old Rules). Summer 1960
- Economic Theory. Winter 1961
- Economic Theory (Old Rules). Summer 1961
- Price Theory. Summer 1962
- Price Theory. Winter 1963
- Price Theory. Winter 1964
- Price Theory. Winter 1965
- Income, Employment and Price Level. Summer 1967
- Money and Banking. Summer 1967
- Price Theory. Winter 1969
- Income, Employment, Price Level. Winter 1969
- Money and Banking. Winter 1969
- International Trade. Winter 1970
- History of Economic Thought. Summer 1974
- Price Theory. Summer 1975
- Industrial Organization. Spring 1977
- History of Economic Thought. Summer 1989
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ECONOMIC THEORY
Preliminary Examination
Summer Quarter 1956
Write your number and not your name on your examination paper. Answer all questions. Time: 4 hours.
Total points: 240.
I. (140 points) True, False, or Uncertain. Explain your answer in each case. Your score will depend heavily on your explanations.
- If a firm is producing in the region of rising marginal costs, the firm is realizing profits.
- If a commodity has a negative income elasticity, the function relating price and quantity consumed may have a positive slope.
- If two goods are substitutes in consumption, a fall in the price of one will always result in a fall in the price of the other.
- A demand schedule for labor shows the amount of labor in physical units that will be taken at each wage. A demand schedule for capital shows the amount of capital in physical units that will be taken at each interest rate.
- For a single consumer, the sum of the income elasticities of demand for all commodities is unity, while the sum of their price elasticities is zero.
- An excise tax affects the allocation of resources among different uses, whereas an income tax does not.
- The competitive firm attempts to equalize price, marginal cost and average cost.
- The marginal cost of producing a commodity is equal to the price of any one factor divided by its marginal physical product, even though many factors are used in producing the commodity.
- An effective price ceiling on cotton, i.e., one that holds its price below the free market level, will decrease the market price of textiles.
- A subsidy of a fixed number of dollars per unit of output might be used as part of a program to control a monopoly in the public interest.
- If the “true cost of living” for a consumer is interpreted to mean the cost of staying on a given indifference surface, then upper and lower limits for the change in a consumer’s true cost of living between period 0 and period 1 are given respectively by the Laspeyres and Paasche indexes using the consumer’s own purchases as weights.
- The supply curve for the output of a monopolist is inelastic at the point of maximum monopoly profit.
- Resources are seriously misallocated in the broadcasting industry in the U.S., through the fact that the cost of broadcasts is borne by advertisers rather than by listeners and viewers directly.
- The rate of interest in a stationary state would be zero.
- It is a convention in economics to draw consumption indifference curves convex to the origin, but we have no way of knowing whether they really are.
- Assume that if the prices of farm products fall farmers will expend more effort in an attempt to maintain their income. Under these circumstances, a reduction in effective farm price supports will increase the volume of farm surpluses.
- If a worker’s utility function in the two dimensions, (1) leisure and (2) all other goods and services, is homogeneous of first degree, then his supply curve of labor will be backward sloping.
- If it takes one day to catch a beaver and two to catch a deer, one deer will exchange for two beavers.
- Almost all railroads are reported to have gross revenues from dining car service that are less than the direct expenses of providing the service. In their own interest the railroads should increase the price of dining car meals.
- Because of the facts stated in number 19, the railroads should discontinue dining car service.
- The elasticity of a linear supply function that passes through the origin is always unity.
- The price of haircuts in Chicago is approximately 40 per cent higher than in New York; therefore, average earnings of barbers in Chicago are higher than in New York.
- Take it as a fact that grade one cocoa commands a premium on world markets over inferior grades; that the Nigerian Cocoa Marketing Board (which is the sole purchaser from producers) has set a differential between grades in prices paid to producers wider than the world market differential; and that they have succeeded in this way in raising sharply the proportion of Nigerian production which is grade one. By so doing, they have greatly improved the efficiency of the Nigerian economy.
II. (60 points)
The competitive private enterprise form of economic organization is regarded by many economists as a sort of ideal which it would be desirable to approximate in practice.
(a) On a purely theoretical level, use the tools of economic analysis to explain to a skeptic precisely in what way(s) and why the competitive private enterprise form is so good. State whatever assumptions and define whatever terms you require, and state explicitly the criteria of excellence that you are using.
(b) Assume an economy that is perfectly competitive. What important economic problems, if any, may still be unsolved despite the fact that perfect competition has been achieved? Explain in each case why the problem is important and why perfect competition does not solve it, or explain why there are no unsolved problems.
III. (40 points)
Some prominent manufacturers such as Sunbeam, Eastman Kodak, and Bayer Aspirin, set minimum prices below which retailers may not resell their products. In most states an agreement to this effect between a manufacturer and some retailers is legally enforceable on all retailers.
(a) What is the probable effect of this practice on the net rate of return on factors of production used in retailing?
(b) What is the probable effect of this practice on the net profits of the manufacturers concerned?
Explain your answers fully.
Source: Harvard University Archives. Papers of Zvi Griliches. Box 129. Folder “Preliminary Examinations, 1955-1957”.
Image Source: University of Chicago Photographic Archive, Zvi Griliches portrait (undated), apf1-06565, Hanna Holborn Gray Special Collections Research Center, University of Chicago Library.