Separation Microeconomics Form Macroeconomics

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					                      Topic 15: The Frontiers of Economic Theory
     1. “Shocks” to technologies, resources, and the structures of demands occur continuously. Market
        adjustments take time. Consequently, David Colander’s macroeconomic model concludes that a
        Walrasian “long run” general equilibrium is unachievable. His model is known as: (a) chase
        equilibrium. (b) dynamic disequilibrium. (c) stochastic macroequilibration. (d) asymmetric
        wage-price reaction functions. (e) creative destruction.

2.      A scholar who won the Nobel Prize in Economics for contributions to theories of industrial
        organization, information, and regulation, observed that it appeared to be a “law” that no
        economic law is named after its original author: Paradoxically named after him, this proposition
        is now known as (a) Say’s Law. (b) Stigler’s Law. (c) Walras Law. (d) Keynes’ law. (e)
        Veblen’s law.
3.      According to George Stigler, a commodity may have more than one price even when markets are
        in equilibrium due to: (a) consumer ignorance. (b) price discrimination. (c) the cost of
        information. (d) monopoly power.
4.      Theories developed in the late 1960s and early 1970s by Armen Alchian and Nobel-prize winner
        George Stigler’s stress that information: (a) about competitors’ prices are never perfect. (b) is
        efficient if produced in a costlessly competitive market. (c) is an economic good that is costly to
        produce, normally requiring investments of time, energy, and other resources. (d) is irrelevant in
        looking at market structures.
5.      The economist who introduced the idea of transaction cost minimization as the root problem of
        economic, firm, and market coordination is: (a) Kelvin Lancaster. (b) Ronald Coase. (c) Armen
        Alchian. (d) Gary Becker.
6.      The analysis of Ronald Coase shows how the root causes of all categories of market failures to
        operate efficiently are: (a) macroeconomic instability. (b) non-rivalness. (c) transaction costs and
        incomplete specifications of property rights. (d) inequities in the distribution of income. (e) free
7.      If transaction costs. (the costs of information, mobility, and contracting) were zero, then all
        categories of market failure would be eliminated except for problems associated with potential:
        (a) public goods. (b) externalities. (c) nonrivalness and nonexclusion. (d) macroeconomic
        instability. (e) inequity.
8.      People stop searching for information about prospective activities when the expected marginal
        benefit from further information is perceived as exceeding expected marginal cost, which gives
        rise to a phenomenon that economists call: (a) planned obsolescence. (b) irrational exuberance.
        (c) money illusion. (d) rational ignorance. (e) incomplete optimization.
9.      The root cause of all categories of market failure whereby markets operate inefficiently is: (a)
        macroeconomic instability. (b) non-rivalness. (c) transaction costs. (d) inequity in the distribution
        of income.

10.   Ronald Coase’s contribution to the theory of the firm is that: (a) firms have the right to freedom
      of entry and exit. (b) firms emerge and exist as a least-cost means of economic coordination. (c)
      firms must be regulated to prevent monopolization. (d) the number of firms in a long run
      equilibrium is irrelevant.
11.   Ronald Coase’s answer to when do firm’s stop growing in size was when: (a) net benefits
      derived from organizing tasks internally fall below net benefits of organizing tasks through
      market contracts. (b) capital becomes static. (c) equilibrium is reached. (d) other firms capture
      remaining market shares.
12.   A. Michael Spence shared the Nobel Prize in 20010 for formalizing the idea that employers
      artificially use formal training and education when screening job applicants to make hiring
      decisions. This phenomenon is known as: (a) nepotism. (b) formalism. (c) human capital
      discrimination. (d) credentialism.
13.   A. Michael Spence won a share of the Nobel Prize in 2001 for his writings on: (a) family
      economics. (b) mathematical game theory. (c) signaling and credentials. (d) the marginal
      productivity theory of income distribution. (e) behavioral economics.
14.   George Akerlof won a share of the Nobel Prize in 2001 for his writings on, among other issues,
      the lemon problem in used car markets. The lemon problem is an example of a type of market
      failure called: (a) inequity. (b) public goods. (c) asymmetric information. (d) industrial
      spillovers. (e) negative externalities.
15.   Shirking and incentives to shirk are reduced by the addition of: (a) the Securities and Exchange
      Commission. (b) more supervisors. (c) tax breaks. (d) automated machines to replace human
16.   In The Modern Corporation and Private Property (1932), Adolph Berle and Gardiner Means
      described the economic dominance of giant corporations, the growing dispersion of ownership of
      common stock, and the separation of ownership from control. These last two observations
      addressed a problem now widely known as: (a) regulatory forbearance. (b) Pareto inefficiency.
      (c) adverse reaction. (d) the principal-agent problem. (e) X-inefficiency. (f) bureaucratic

  Behavioral Economics
17.   The idea that consumers actually demand jointly produced characteristics rather than products or
      services themselves is attributed to: (a) Alfred Marshall. (b) Karl Marx. (c) Chamberlin. (d)
      Kelvin Lancaster.
18.   Economic theorists increasingly invade academic turf previously staked out by practitioners of
      such other disciplines as political science (public choice) and sociology (e.g., investigations of
      familial interactions by Gary Becker et al.). Some observers characterize this initiative by
      economists as: (a) theoretical presumptiveness. (b) intellectual imperialism. (c) excessive
      rationality. (d) disciplinary dissonance. (e) economic re-regulation. (f) economic barbarism.
19.   The Nobel Prize winner who identified economic sociology as an amalgam of concepts dealing
      with economic markets for goods (e.g. beets or shoes) and markets for varied sociological
      categories such as sex, marriage, and polygamy is: (a) George Stigler. (b) Milton Friedman. (c)
      Gary Becker. (d) Paul Samuelson.

20.   Gary Becker categorized knowledge and skills that are productively valuable to many potential
      employers, and which consequently generate higher wages, as being derived from investments
      in: (a) specific human capital. (b) broad human capital. (c) universal human capital. (d) general
      human capital. (e) fundamental human capital.
21.   The thinker who creatively views each household as its own small factory, “Combining capital
      goods, raw materials, and labor to clean, feed, procreate and otherwise produce useful
      commodities,” is: (a) Gary Becker. (b) Thorstein Veblen. (c) Arthur C. Pigou. (d) Ronald Coase.
      (e) Robert Lucas.
22.   Gary Becker observed that in making ultimate consumption goods, the two things a household
      must combine are: (a) capital and labor. (b) child and parental labor. (c) market goods and time.
      (d) rent and interest.
23.   The “Rotten Kid Theorem” addresses theories of household efficiency developed by: (a)
      Vilfredo Pareto. (b) Jeremy Bentham. (c) Gary Becker. (d) Thorstein Veblen.
24.   An observation that, contrary to Malthus and Ricardo, as income rises, the number of children
      born actually declines, is central to a theory of household behavior authored by: (a) Gary Becker.
      (b) Margaret Meade. (c) Horst Wessel. (d) Joan Robinson. (e) Ayn Rand.
25.   Gary Becker integrates ______ as an opportunity cost when calculating the market prices of any
      good or service.: (a) the amount supplied. (b) the consumption rate. (c) time required for an
      activity. (d) the amount demanded.
26.   Not among issues central to innovative theories developed by the Nobel-prize winning economist
      Gary Becker would be the economics of: (a) crime and punishment. (b) divorce. (c)
      macroeconomic rules versus discretionary policies. (d) suicide. (e) racial discrimination. (f) time.
27.   The Nobel-prize winning economist best known for applying economic reasoning to time, racial
      discrimination, crime and punishment, and the intricacies of family activities and relationships is:
      (a) Robert Shiller. (b) Robert Frank. (c) Gary Becker. (d) Frank Knight. (e) Joan Robinson.
28.   The economic approach to crime and punishment developed by Gary Becker suggests that: (a)
      Jeremy Bentham’s argument that “the punishment should fit the crime” would result in
      excessively cruel punishment. (b) increased probabilities of apprehension, conviction, fines, or
      imprisonment should optimally result in lower fines or shorter sentences. (c) socio-economic and
      familial background is the primary determinant of criminal behavior. (d) drug offenses should be
      viewed as psycho-social problems better treated with therapy than imprisonment.
29.   If market transactions truly shift ownership of goods from people who value the particular goods
      relatively less to people who value these goods relatively more (in comparison to other goods),
      then: (a) rich people absolutely value all goods more than poor people do. (b) adoptable children
      might, on average, be better nurtured if laws that forbid buying and selling children were
      repealed. (c) there would be no shortages of transplant organs if involuntary transfers were
      legalized. (d) wage-price controls may be necessary to curb inflation, thereby ensuring the
      accuracy and stability of market information.

30.   Let’s define “bliss” as joint maximization of consumer and supplier surpluses. Consider
      romantically-involved “significant others” Chris and Lynn. Perfect “bliss” in their relationship
      would occur in the unlikely (impossible?) event that, say, Chris, has a: (a) willingness to
      withhold affection until they compromise consistent with the MC = MR formula. (b) perfectly
      elastic demand for Lynn’s affection and Lynn has a perfectly elastic supply of affection for
      Chris. (c) complete understanding of Lynn’s demands for affection. (d) perfectly inelastic supply
      of affection for Lynn that corresponds exactly at the huge quantity of affection on Lynn’s
      perfectly inelastic demand for affection from Chris. (e) perfect comprehension that Lynn cannot
      do any better in any other relationship.
31.   Two notable cognitive psychologists who concluded that humans treat risk much less
      symmetrically than economists conventionally assume, and that people are also are far less
      rationally consistent than economists commonly suppose, are: (a) Havelock Ellis and Alfred
      Kinsey. (b) Erich Fromm and Sigmund Freud. (c) Ivan Pavlov and B. F. Skinner. (d) Amos
      Tversky and Daniel Kahneman. (e) Abraham Maslow and Rollo May.
32.   Robert Frank conducted a prisoners’ dilemma experiment on three separate groups: [1] college
      students who had never taken any economics. [2] students who had taken one economics course.
      [3] graduate students in economics. His surprising results may be interpreted as evidence that: (a)
      studying economics causes many people to become overly suspicious of other people’s motives.
      (b) greedy behavior facilitates technological innovations. (c) individuals are as rational as
      economists assume. (d) markets never achieve equilibrium.
33.   Traditional economic theory concludes that a person who loses basketball tickets should not
      forego the game, but should instead purchase the tickets once again. However, many people fail
      to purchase more tickets, even though the cost of going to the game has not increased, and the
      loss of the first set of basketball tickets is a sunk cost. This and other economic anomalies have
      been explained by the cutting-edge behavioral economist: (a) Gordon Tullock. (b) Paul
      Samuelson. (c) Richard Thaler. (d) James Buchanan. (e) Kenneth Arrow.
34.   Richard Thaler’s behavioral economics continues to irritate neoclassical theorists because parts
      of it imply that: (a) innovation is the key to economic growth. (b) people are seldom self-
      interested. (c) successful individuals are not always rational decision makers. (d) marginal utility
      analysis is bunk.
 35. Speculative bubbles are least consistent with the concepts underpinning. (a) a Keynesian beauty
     contest. (b) Daniel Kahneman’s peak/end rule. (c) classical fundamental analysis. (d) Richard
     Thaler’s “economic anomalies.”
 36. Nobel Prize winner Daniel Kahneman developed a peak/end rule indicating that the absolute
     values of outcomes may be somewhat less important for individuals’ assessments of their own
     welfare than are the: (a) most recent changes in direction of the path of the outcome for the
     individual. (b) subjective marginal values of the goods considered. (c) objective real values of
     the relevant goods. (d) most recent changes in the overall status of the economy.
37. According to the work of 2002 Nobel Prize winner Daniel Kahneman, the average investor is
    more likely to hold onto a stock: (a) after a huge rise and a slight decline. (b) after a slight rise
    and then a slight decline. (c) after a slight fall and then a huge rise. (d) after a huge fall.

38.   The hypothesis that “people may know when they are happy, but _italics_” was supported by the
      results of _name_’s experiment in which people ate various amounts of ice cream and listened to
      music. (a) do not know how to maintain that happiness / Sir Richard Munn (b) must first be free
      to be happy / David Hume (c) are programmed to be unhappy / B.F. Skinner (d) do not know
      what will make them happy / Daniel Kahneman
39. A term now commonly used to describe John Maynard Keynes’ notion of animal spirits as the
    reason why stocks may vary so far above reasonable market value (true present value) after
    favorable news is: (a) irrational exuberance. (b) stock influx. (c) stock outflux. (d) corporate
    malfeasance. (e) unwarranted exhilaration. (f) peak/end explosiveness.
40. The Yale economist who examined “irrational exuberance” as an explanation for the recent
    boom and then bust of technology stocks is: (a) Gary Becker. (b) Robert Shiller. (c) Frank
    Knight. (d) John Bates Clark. (e) Robert Frank.
41. Economists who follow the lead of Nobel Prize-winner Herbert Simon [1916-2001] in
    trying to explain human behavior would be least likely to focus on how “ bounded” is the
    widespread human attribute of:
42. No one can perform all the mental gymnastics necessary to perfectly process information so that
    all their decisions are mathematically optimal, so most people rely heavily on mental shortcuts
    that cognitive psychologists and behavioral economists call: (a) windage. (b) heuristics. (c)
    compromises. (d) rational ignorance. (e) conciliations.

  Game Theory
43.   The pathbreaking book Game Theory [1943] mathematically characterized alternative strategies
      for areas ranging from war to gambling to business, ad infintum, and was coauthored by: (a) John
      Nash and Leonid Kantarovich. (b) John von Neumann and Oskar Morgenstern. (c) Kurt Gödel
      and Richard Feynman. (d) Carl Friedrich Gauss and Pierre de Fermat. (e) Bertrand Russell and
      Alfred North Whitehead.
44.   Jon von Neumann followed in the footsteps of A.A. Cournot when he developed: (a) the
      prisoner’s postulate. (b) game theory. (c) input-output analysis. (d) linear programming. (e)
      activity analysis.
45. The Hungarian-born mathematician who concluded that almost any human interaction can be
    viewed as a strategic game was: (a) Laurence Klein. (b) Jon von Neumann. (c) John Maynard
    Keynes. (d) Frederick von Hayek
46. The branch of mathematical analysis developed to study interdependent decision making
    between two or more parties in conflict situations is: (a) bipolar derivations. (b) duopoly
    algorithms. (c) game theory. (d) integral bi-calculus. (e) duopsony.
47.   The elementary game with the greatest overlap of interest among modern economists and social
      psychologists is: (a) general equilibrium analysis. (b) a general theory of employment. (c) the
      alienation game. (d) the prisoner’s dilemma. (e) the confidence game.

48. The mathematical economist who, after brilliant work as a young man, suffered acute
    schizophrenia, but who would later win a Nobel Prize for his earlier advances in some technical
    aspects of game theory is: (a) John Nash. (b) Robert Solow. (c) Gerard Debreu. (d) Paul A.
    Samuelson. (e) George Stigler.
 49. Consider a special type of auction for, say, a $20 bill in which the highest bidder gets the $20,
     but the second highest bidder also must pay the amount he or she bid. If at least two bidders
     pursue dominant strategies, then such a “game” lacks a: (a) partial disequilibrium solution. (b)
     Nash equilibrium. (c) von Neumann solution. (d) Walrasian partial equilibrium. (e) neutral
 50. During the Cold War pitting the US against the USSR, each side tried to match or exceed the
     armaments built by its adversary. In terms of game theory, the reductions in standards of living
     on both sides caused by the nuclear arms race reflect the outcome of a: (a) positive-sum game.
     (b) negative-sum game. (c) zero-sum game. (d) partial-sum game.
 51. Weekly poker sessions among friends are an example of a: (a) positive-sum game. (b) negative-
     sum game. (c) zero-sum game. (d) partial-sum game.
 52. From the vantage points of society as a whole, examples of positive sum games would include:
     (a) international trade and happy marriages. (b) profit maximization by a monopolistic
     entrepreneur. (c) industrial espionage and technological innovation. (d) use of the draft to
     procure military personnel. (e) profits from buying stocks based on insider information obtained
     through bribery.
 53. Game theorists would view a civil war where both parties involved would have been better off if
     they had compromised instead of fighting is an example of a: (a) positive sum game. (b) negative
     sum game. (c) zero sum game. (d) conquest game.

Public Economics
 54.   When an action negatively affects someone not directly involved in the decision about the
       action, a market failure may occur that is characterized as a negative: (a) externality. (b)
       spinover. (c) synergy. (d) irrationality. (e) overspin.
 55.   Market inefficiencies are least likely to be caused by: (a) positive externalities. (b) the
       excludability of rival goods. (c) asymmetric information. (d) monopolistic prices being higher
       than marginal social cost. (e) free-riding for nonrival goods.
 56.   Market failures would be least likely to be ascribed to situations of: (a) inequity in the
       distribution of income. (b) the exercise of monopoly power without price discrimination. (c)
       asymmetric information. (d) perfect information. (e) positive or negative externalities.
 57.   John Stuart Mill, Alfred Marshall, Arthur C. Pigou, Richard Musgrave, and Paul Samuelson
       have all been pioneers, during different periods, in the study of situations in which
       governmental regulation or provision of certain types of goods may be efficient more efficient
       than market-provision, and of appropriate systems of taxation to pay for such goods. This area
       of study is known as (a) socialism. (b) public finance. (c) political science. (d) public choice.
       (e) tax-and-spend economics.

 58.    Richard Musgrave’s normative theory of public finance proposed compartmentalization that
        would yield perpetually balanced governmental budgets for his: (a) allocation and distribution
        branches of government. (b) consolidated federal, state, and local budgets. (c) stabilization
        branch of government. (d) business cycle branch of government. (e) exhaustive spending
        branch of government, but not for his investment branch of government.
 59.    According to Paul Samuelson, the marginal cost of supplying a public good to an additional
        user is: (a) extremely high. (b) negligible. (c) equal to the total cost of the good. (d) always
        equal to the price paid by the user.

 Mathematical Economics and “High Theory”
 60. In his doctoral thesis Foundations of Economic Analysis (1947), Paul Samuelson remarked: “To
     a person of analytical ability perceptive enough to realize that mathematical equipment was a
     powerful sword in economics, the world of economics was his or her oyster in 1935.”.
     Samuelson’s dissertation (revised into a graduate level textbook) focused on mathematical
     optimization to underpin modern theories of: (a) economic growth and development. (b)
     microeconomics. (c) games. (d) macroeconomics. (e) efficiency, stability, and equity.
 61. In 1948 the Foundations of Economic Analysis raised the ante for the amount of mathematics
     used in economic theory. Foundations was written by: (a) Paul Samuelson. (b) Gerard Debreu.
     (c) Kenneth Arrow. (d) Gary Becker. (e) Joseph Stiglitz.
 62. Hal Varian, a modern microeconomist, advocates that model building be based on the principle
     of: (a) KICK. (b) KISS. (c) CANT. (d) DON’T. (e) ABLE.
 63. Thorstein Veblen would be to dreaded professor as: (a) Karl Marx would be to defender of the
     status quo. (b) John Maynard Keynes would be to mundane. (c) Reverend Thomas Malthus
     would be to logically organized thought. (d) Wesley Clair Mitchell would be to Austrian a
     priorism. (e) Paul Samuelson would be to math geek.
 64. Accelerating rates of empirical testing of economic theories over the past fifty years are
     primarily attributable to: (a) the globalization of international markets. (b) applications of
     calculus to clarify economic issues. (c) comprehensive and well-organized data bases and
     increasingly powerful statistical software. (d) improved literacy throughout the world. (e) the
     “Publish or Perish Standard for Tenure” adopted by the National Association of Colleges and
65.    The Nobel-prize winning, Dutch-born economist who worked out a general equilibrium solution
       to wartime resource allocation in 1942 while working for the Combined Shipping Adjustment
       Board, and who spent most of his post-WWII years at Yale, was: (a) Jon von Neumann. (b)
       Ragnar Frisch. (c) Jan Tinbergen. (d) Tjalling C. Koopmans. (e) Oskar Morgenstern.
66.    The Nobel-prize winning works of the émigré economists Wassily Léontief (Russia-Harvard)
       and Tjalling Koopmans (Netherlands-Yale), and the Soviet economist Léonid Kantarovich, all
       treated the economy as composed of interdependent sectors in which the production of one sector
       is an initial resource of other sectors, and vice versa. Léontief’s version of this theory is known
       as: (a) roundabout production. (b) input-output analysis. (c) circular production. (d) dynamic
       analysis. (e) nonlinear programming.

  Economic Growth
67.   Walt W. Rostow’s theory of economic development does not include as a necessary condition
      for an economy to “take-off” the requirement of: (a) a stable government. (b) a reasonably well
      developed education system. (c) savings and investment at 10% or more of national income. (d)
      agriculture contributing less than 5% to Gross Domestic Product.
68.   NOT among three key assumptions of Robert Solow in his Growth Theory: An Exposition, is the
      idea that: (a) labor supply grows over time. (b) consumers save a given share of their income. (c)
      the money supply is constant. (d) capital and labor can be substituted for each other in the
      production process.
69.   Robert Solow found that the ___________ of the economy is equal to the annual labor force
      growth rate plus the annual output per worker growth rate.: (a) short-term rate of growth. (b)
      expected inflation rate. (c) long-term rate of investment. (d) long-term rate of growth. (e) none of
      the above.
70.   Kenneth Boulding argued that recycling is required to allow achieving “sustainable” growth in a
      “closed” economic system so that, like a stable biological system, we use all outputs (including
      waste) as inputs. Boulding referred to the global environment of this theory as: (a) survival of the
      fittest. (b) Spaceship Earth. (c) input-output production. (d) post-Darwinism. (e) roundabout
71.   The "limits to growth" school of thought advocates policies that would: (a) hasten natural resource
      depletion. (b) postpone the stationary state indefinitely. (c) slow economic growth or bring it to a
      halt. (d) unshackle regulations that inhibit growth.
72.   According to Kenneth Boulding and other thinkers skeptical of uncontrolled economic growth, a
      "cowboy mentality" may be inappropriate on "spaceship earth" because: (a) finite resources may
      make ever higher consumption impossible unless we recycle diligently and technology improves
      more rapidly than population. (b) cows are sacred according to Buddhists and Hindus. (b) assembly
      line industrial processes are dehumanizing. (c) economic growth produces pollution and moral
73.   The slogan "Small is Beautiful" is most compatible with the concepts of: (a) Leninism, Stalinism,
      and Maoism. (b) feudalism, capitalism, and class struggle. (c) a dictatorship of the proletariat and
      pure communism. (d) Mohandas Gandhi, Buddhist economics, and limits to growth.
74.   The view that small is both beautiful and necessary is central to the schools of thought known as: (a)
      German historicism and American institutionalism. (b) Buddhist economics and limits to growth.
      (c) feudalism and monarchism. (d) central planning and command economics.
75.   The most internally contradictory pair of terms would be: (a) libertarianism and capitalism. (b)
      “small is beautiful” and central planning. (c) anarchism and syndicalism. (d) Thomas More and
      utopianism. (e) Karl Marx and Friedrich Engels.
76.   The idea that the problem of scarcity is best resolved by reducing wants so that they are
      consistent with the goods available is a part of the philosophy underpinning: (a) the Judeo-
      Christian heritage that dominates western society. (b) Karl Marx’s ultimate communist society.
      (c) aspects of Buddhism, Taoism, and Hinduism. (d) the golden age of Greece, during the times
      of Socrates, Plato, and Aristotle.

77.   Least consistent with the idea that Small is Beautiful would be: (a) "limits to growth." (b) Central
      planning (c) E. F. Schumacher. (d) Mahatma Gandhi. (e) anti-materialism.
78.   According to the "Small is Beautiful" approach to economics: (a) human wants should be reduced
      to be consistent with available resources. (b) capital intensive technology will free people from the
      toils of labor. (c) appropriate modern technology will increase labor specialization. (d) spiritual
      enrichment is the product of material poverty.
79.   According to "Buddhist" economics, scarcity can best be dealt with by: (a) rapidly exploiting
      exhaustible resources to maximize current production. (b) reducing human wants to levels
      consistent with available resources. (c) socialist systems of central planning. (d) accelerating
      growth rates in primitive economies.
80.   Maximization of utility via materialistic consumption would be least consistent with the
      idealistic philosophy of (a) John Stuart Mill. (b) Mohandas Gandhi. (c) David Ricardo. (d)
      Thomas Malthus. (e) Adam Smith. (f) Karl Marx.
81.   “Small is Beautiful,” E.L. Schumacher’s idea that scarce resources can be preserved by limiting
      consumption, is often used to characterize the economic philosophy of: (a) Luca Pacioli. (b)
      Mohandas Gandhi. (c) Joe Kernen. (d) Kenneth Boulding. (e) Gunnar Myrdal.
82.   The 1950s are like times today in all of the following ways except: (a) low inflation. (b) high
      productivity. (c) low interest rates and a housing boom. (d) high consumer debt. (e) all of the
83.   In the last 25 years or so, the restructuring of the US economy has been facilitated primarily by
      the invention and widespread distribution of: (a) the computer. (b) the palm pilot. (c)
      technologies in the stock market. (d) freer market systems. (e) cell phones.
84.   All of the following are characteristics of the “new economy” EXCEPT for the increased: (a)
      mobility of capital. (b) global marketing of services by small new business firms. (c) emergence
      of multinational corporations. (d) liberalization of international trade. (e) use of computers to
      consummate transactions in financial markets.

  International Trade
85.   The theory that a country exports goods for which production requires intensive use of the
      resources relatively abundant in the country, and imports goods that intensively use resources
      that are relatively scarce in the country, is developed in: (a) Adam Smith’s Wealth of Nations. (b)
      Richard Cantillon’s writings. (c) mercantilism. (d) the Heckscher-Ohlin-Samuelson model. (e)
      David Ricardo’s theory of comparative advantage.
86.   Significant innovations to the Heckscher-Ohlin-Samuelson model introduced since the 1960s by
      the “new” international trade theorists do not include consideration of how: (a) internal and
      external economies of scale and scope influence patterns of trade. (b) Edwin Chamberlin’s
      monopolistic competition model applies to competition among giant international firms based in
      different countries. (c) game theory can be used to model the strategies of competing
      international giants. (d) outsourcing inevitably reduces the gains from trade.

87.   Edwin Hastings Chamberlin’s theory of monopolistic competition became increasingly
      discounted as game theory began to dominate the theory of industrial organization, but it has
      regained credibility as viable by serving as a foundation for: (a) public choice theories of
      political behavior. (b) the “new” theory of international trade first developed in the early 1970s
      by Paul Krugman. (c) modern theories of price setting in auctions. (d) explanations of how firms
      compete by attempting to create a “brand image” through advertising.
 88. Paul Krugman’s contemporary rolling form of Edwin H. Chamberlin’s theory of monopolistic
     competition is best exemplified by: (a) DuPont’s historical dominance over innovative textiles
     such as Tyvek, Lyrca, and Nylon. (b) the passing of dominance in the textiles industry from the
     Great Britain  US JapanChina ?. (c) OPEC’s control of the world oil supply. (d) U.S.
     wheat production.


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