Econ434MC15A - Topic 15: The Frontiers of Economic Theory...

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Topic 15: The Frontiers of Economic Theory Macroeconomics 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. Information 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 ridership. 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.
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Econ434MC15A - Topic 15: The Frontiers of Economic Theory...

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