ECON 338 SO1

Spring 2001

Final Exam

Malcolm Rutherford

Two Hours

Answer any three of the following questions.

Do not use note form.

1. Explain in detail Menger's discussion of economic goods, the valuation of goods, and the valuation of "higher order goods" (factors of production). What distinguishes Menger's discussion of these topics from those provided by (i) the earlier Classical economists, and (ii) other marginalists such as Jevons?

2. Explain Marshall's concept of external economies and diseconomies. Why did Marshall think that external diseconomies provided a justification for a tax on output? How did Pigou extend the concept of external costs as a ground for intervention, and what criticism of Pigou's position was made by Knight?

3. Explain (i) Sraffa's criticism of Marshall's decreasing cost industry case and its implications; and (ii) Chamberlin's criticism of the perfectly competitive model and his own analysis of monopolistic competition in the "large group" case.

4. What problems existed in the marginal utility approach to demand theory as developed by Marshall? Explain how Hicks' revision of demand theory using indifference curve analysis overcame these problems.

5. Explain (i) the Fisher and the Cambridge (Marshallian) approaches to the quantity theory of Money; and (ii) Wicksell's theory of monetary disturbances in the economy.

6. Outline in detail each of Keynes's major criticisms of "the postulates of Classical economics."

7. Briefly outline the Keynesian model of underemployment equilibrium. Assuming flexible wages and prices, what is the "Keynes effect" and why did Keynes feel that it would not necessarily lead to equilibrium at full employment? What arguments were later put forward by Pigou and Patinkin concerning an adjustment process back to full employment equilibrium.