Harvard. Graduate Economic Theory Exam. April 1962

These posts are unlikely to threaten the popularity of Wordle, but letting graduate prelim exams in economics of yore test one’s wits or perhaps amuse by their presumption is possibly a better use of time for anyone from wannabe economist to crusty old emerita/us in the field.

So with little ado, Economics in the Rear-view Mirror adds Harvard’s April 1962 graduate exam in economic theory to its collection of artifacts. 

_____________________________

Other Harvard Written Exams
in Economic Theory

April 11, 1961
November 13, 1962
April 8, 1963

_____________________________

PLEASE HAND IN THE EXAMINATION TEXT WITH YOUR BLUEBOOK

HARVARD UNIVERSITY
Department of Economics

WRITE LEGIBLY

Written Examination
in Economic Theory
April 10, 1962

All students must answer Part I; choose four questions from Part II.

Part I (one hour)

State whether each of FOUR of the following statements is true or false, justifying your answer in each case:

1. The principle that a firm is maximizing its profits when marginal cost equals marginal revenue does not apply to oligopolistic firms.
2. If a firm’s average cost curve in always decreasing, that firm will lose money if it sets its price equal to its marginal cost.
3. If the price of a commodity rises, the demand for that commodity may rise too and the quantity offered for sale may fall.
4. If production of the purely competitive firm is subject to constant returns to scale, a firm will not be minimizing cost unless it is producing in the range where every factor is subject to non-increasing returns.
5. If a monopolist sells in two separated markets with different demand curves, in order to maximize his profits he must charge a lower price in the market where the elasticity of demand is lower in absolute value.

Part II (three hours)

1. Keynes stated that from a policy viewpoint everything that can be done by money wage cuts can be done more effectively through monetary policy.
   1. Is this statement compatible with the theoretical framework of the General Theory?
   2. If a Haberler-Pigou-Patinkin real balances effect was of significant quantitative importance, would this change your conclusions about the two policies?
2. Discuss the relative merits of financing a new superhighway by tolls or by gasoline taxes.
3. “The theory of the competitive market system’s pricing of all products, allocation of resources, and distribution of income through payments for the factors of production, seemed to many nineteenth-century economists the main part of all economic theory, because it seemed to best demonstrate the desirability of the liberal, competitive regime.”
   Discuss the implications and validity of the statement, and support your points by considering as cases any two (your own choices) of the “many” theorists presumably referred to.
4. Using a two commodity model, show that, with independence of utilities and an assumption of diminishing marginal utility for each good, there can be no “inferior” good.
5. In different contexts the Stockholm school, exemplified by Ohlin, and post-war economists like Harrod have proposed theories of the dynamic instability of economies. Sketch these two types of theory with particular emphasis on the differences between them.
6. Would there be time preference or waiting in a static state? A “marginal productivity” of capital? Liquidity preference? Interest? Discuss the issues in each case. Be sure your own answers are consistent with each other.
7. The possibility of “excess capacity” under monopolistic competition has been vigorously defended and categorically denied. State and defend your own views, with some discussion of both sides of the question.

Source: Duke University. Economists’ Papers Archive. David M. Rubenstein Rare Book & Manuscript Library. Edward H. Chamberlin Papers, Box 17, Folder “Economics Department 1960-62”.

Source: Harvard University. From the cover of the Class Album 1946.