Economics 493
Winter 2010
Homework 7
Due Wednesday, March 10
1. 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?
2. Explain why Marshall believed that taxing increasing cost industries and using the proceeds to subsidize decreasing cost industries is a desirable thing to do.
3. How does general equilibrium analysis differ from partial equilibrium analysis? What does Walras' general equilibrium analysis have to say about the determination of input and output prices, i.e. the debate over whether input prices cause output prices or vice-versa?
4. According to Wicksell, how does inflation or deflation come about? Can can inflation/deflation be controlled, i.e. can prices be stabilized? If so, how?
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