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EC305 Professor Newmark

Instruct i ons . Do 10and onl y 10of the 17 questions. Each question is
worth 50 point s. Be concise. You should sign the honor pledge on the last
page.
1. Economi cs assumes peopl e are rational. !ow did lecture sa" economi st s
define rationalit"# $ome critics argue that this assumpt i on is too strongt hat
it%s too unrealistic. &n lectur e & present ed three replies to that argument . 'ist
them.
(. )e studi ed a theor" of economi c growt h that stress ed entrepr eneur s. !ow
did that theor" define entrepr eneur s# )hat did that theor" predict a*out
economi c growt h#
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Final Exam
Fall, 2012
+. ,he readi ng a*out the -almer s and .ishers illustr at ed what
import ant economi c concept #
/. 'ist0 as discuss ed in lectures0 three go1ernme nt failures. Briefl" gi1e an
e2ampl e of each.
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5. .rom 3ic4 $chult50 Forbes 0 11656117 $e1er al essenti al0 in8ect a*l e medicines
ha1e *een in short suppl" in recent mont hs. 9ncologist s and other medical
speci alist s ha1e *een una*l e to acces s critical generic medicines when needed.
,he medi a has report ed that erratic foreign suppl" of *asic ingredi ent s and the
small num*er of compet ent drug manufact ur er s are among the causes. Does
economi cs offer anot her cause for the short suppl"# E2plain *riefl" *ut
carefull".
:. $tat e three wa"s the mar4et can reduce the pro*lem of pro1iding pu*lic
goods.
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7. ; recent opinion piece stat ed7
.or e2ampl e0 in the pi1ot al 1</+ case of 3ational Broadcas ti ng
=ompan" 1. >nited $tat es0 ?ustice @and former !ar1ard 'aw
professorA .eli2 .ran4furt er e2ami ned what it meant for the
.eder al =ommuni cati ons =ommi ssion to assign frequenci es to
different *roadcas t er s ser1ing the pu*lic interest 0 con1eni ence
or necessi t". 'i4e the progres si1e he was0 .ran4furt er
commi t t ed0 in a few terse paragr aphs0 all the intellect ual sins
against which !a"e4 in1eighed.
.ran4furt er thought himself too sophisticat ed to accept the
laisse5B faire position that the .== should *e treat ed as a 4ind of
traffic officer0 policing the wa1e lengt hs to pre1ent stations from
interfering with each other. !is grander 1ision put s upon the
=ommi ssion the *urden of det er mi ning the composi tion of that
traffic0 *ecaus e the facilities of radio are not large enough to
accommodat e all who wish to use them.
)hat were .ran4furt er%s mist a4e@ sA# E2plain carefull".
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C. Briefl" outline the repl" to You didn%t *uild that gi1en in lectur e.
<. ,he main reason speci al interest groups are a*le to get costl" programs
enact ed that fa1or their interest s is that7
;. those in speci al interest groups ha1e no morals.
B. program cost s are spread out so other indi1iduals ha1e little
incenti1e to lo**" against such programs.
=. man" politicians are mem*er s of such speci al interest groups0 and
the" ha1e similar interest s.
D. politicians are more corrupt than other indi1idual s.
E. Both ; and D are true.
.. 3one of the a*o1e
10. &n ?ohn Dalt%s long speech near the end of ;tlas $hrugged he stat es0 ,he
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onl" proper purpos e of a go1ernment is to prot ect man%s right s0 which
means . . . !ow does Dalt compl et e that sent ence# @)hat0 in Dalt%s 1iew0 is
the proper purpos e of go1ernment # Be specific.A
11. ; critic of ;"n Eand recentl" wrot e7
$uch is the ;"n Eand 1ision of paradi se7 an ;merica that would
resem*l e the lands from which our ancest or s emigrat ed0
altruism confined to ignored0 fringe te2t s0 grinding po1ert " and
star1ation coe2isting alongsi de the opulence of the wealth". 'os
;ngeles0 =hicago0 and 3ew Yor4 would *ecome li4e =airo and
=alcutt a0 with walled encla1es prot ecting the wealt h" from the
malnourished0 uneducat ed mass es outside.
&s the critic right or wrong# E2plain carefull".
1(. )hat common p do the ,ea -art" and 9ccup" ha1e# E2plain. !ow do the"
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differ in their propos ed solutions#
1+. ?ohn $tewart stat ed that ;"n Eand%s 1iews wor4ed reall" well for F8ustG
e2traor dinar" peopl e. . . . it seems to *e 1er" elitist. )h" is $tewart wrong#
E2plain carefull".
1/. $tat eme nt s a*out the recent stat eme nt s and acti1ities of Energ" $ecret ar"
$te1en =hu7
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&n )ashingt on0 the >$ $ecret ar" of Energ"0 Dr. $te1en =hu0 *ro4e with
9*ama admi nistr ati on renewa*l e energ" polic"0 telling stunned
alternati1e energ" de1eloper s at a recent meeti ng on alternati1e fuels
that Hif it were up to me0 & would put e1er" cent into electric cars0H
according to a source present at the meeti ng.
. . . the D9E is in charge of some *ig things and0 this "ear0 it has
handed out *illions in loan guarant e es for plugB in 1ehicles0 including
mone" for .ord @I5. < *illionA0 3issan @I1. : *illionA0 ,esla Jotors @I/:5
millionA and .is4er @I5(C millionA.
;n economi st wrot e that in 1iew of these stat eme nt s and acti1ities0 Dr. =hu
should get the )esle" Jouch ;ward. )ho was )esle" Jouch# )h" do thin4
the economi st wrot e that Dr. =hu was li4e )esle" Jouch#
15. 'ife e2pect anc" is lower in the >. $. than other rich count ri es. &s this fact a
good ground to critici5e ;merican healt h care# )h" or wh" not# )hat0
according to lectur e0 is anot her meas ur e that should *e used to assess the
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performance of >. $. healt h care#
1:. ;s a result of the separ ati on of cost and *enefits what does economi c
theor" predict a*out how legislation will *e designed# Di1e an e2ampl e from
lectur e.
17. -et er $aunder s0 in )h" =apit alism is Dood for the $oul 0 wrot e0 ,he
pro*lem for those of us who *elie1e that capit alism offers the *est chance
we ha1e for leading meani ngful and worthwhile li1es is that in this de*at e0
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the de1il has alwa"s had the *est tunes to pla". E2plain carefull" what he
meant .
-lease si gn the following stat eme nt 7 I have nei t her given nor
recei v e d unaut hori z e d aid on thi s tes t .
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