Review Questions - Material after Midterm 2
[Through lecture 15 - more to follow. UPDATE: Questions now extend through Lecture 16 and 17.]
1. What was Jevons' main contribution to the theory of exchange?
2. Explain Jevons' determination of the length of the working day.
3. What is the water-diamond paradox? How does Jevons solve it?
4. Discuss and illustrate (using a table) Menger's ideas on total and marginal utility.
5. Compare and contrast Menger's and Jevon's views on total and marginal utility.
6. What are Menger's views on factor price determination? How can they be used to refute the labor theory of value?
7. Explain Clark's marginal productivity theory and how it was used to counter Marx's claim that labor is exploited under capitalism.
8. What was Edgeworth's main contribution to utility theory? Explain.
9. Explain the contributions made by Edgeworth to production theory.
10. Explain how classical economists used marginal productivity theory to develop a theory of employment. What was the key to maintaining full employment in this framework?
11. Explain why Marshall felt that economics is the most precise of all the social sciences.
12. Explain Marshall's views on consumer and producer surplus.
13. Show how Marshall used the idea of consumer surplus to analyze the welfare effects of taxes for the constant cost case. What did he conclude? Why does he believe we should tax decreasing cost industries and use the proceeds to subsidize increasing cost industries?
14. According to Marshall, what determines prices, supply or demand? Does the time period matter?
15. What factors, according to Marshall, cause firms to become more efficient as they grow? What determines whether they are increasing or decreasing cost industries? Why don't decreasing cost industries eventually become monopolized?
16. Explain Marshall's stability analysis for the supply and demand model. How does his analysis compare to modern treatments of stability?
Update: Questions from Lecture 16
1. What is general equilibrium theory? How does it compare with partial equilibrium models?
2. What did Walras contribute to general equilibrium theory? What does this imply about how values are determined, i.e. the direction of causality between input prices and output prices?
3. What are some of the problems associated with general equilibrium theory?
4. Give an overview of how the theory of gluts and the need for governments to intervene to maintain full employment starting with Malthus and Ricardo, continuing through the neoclassical economists, and ending with the contributions of Keynes.
Update: Questions from Lecture 17
1. How have views on government intervention to promote full employment changed since the Mercantilists? Be sure to summarize Mercantilist thought, the response of the Physiocrats and Smith to the Mercantilists, the Ricardo-Malthus debate, Say's law, Keynes and the Keynesians, and the views based upon the New Classical model, the Real Business Cycle model, and the New Keynesian model.
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