Economics 321 Final

Prof. Bryan Caplan

Fall, 2005




        You have 90 minutes to complete this exam.

        You may use any books, notes, or other materials that you wish, but avoid spending too much time on any one question.

        Partial credit may be awarded on all questions.

        The maximum possible number of points is 100.

        You should have 4 pages, counting this one.


Part 1: True, False, and Explain

(10 points each - 2 for the right answer, and 8 for the explanation)

State whether each of the following six propositions is true or false. In 2-3 sentences (and clearly-labeled diagrams, when helpful), explain why.


1. Suppose workers dislike taking orders from a boss; they prefer to be self-employed.


T, F, and Explain: Hired employees get a compensating differential and earn more than their MVP.











2. Suppose the government imposes a $20/hour minimum wage.


T, F, and Explain: There will be a surplus of labor, but ALS does not shift.











3. T, F, and Explain: Landsburg would disagree with Caplan's claim that "the standard view of the welfare state is wrong."










4. Suppose an employed person is considering whether to search for a higher-paying job. The only cost of search is time.


T, F, and Explain: A proportional income tax reduces the amount that the worker chooses to search.















5. T, F, and Explain: The earnings difference between men and women disappears if you simply control for intelligence.













6. Suppose women find criminals more attractive than other men.


T, F, and Explain: The result would be that the level of crime and criminals' earnings increase.












Part 2: Short Answer

(20 points each)

In 4-6 sentences, answer all of the following questions.



1. Suppose there is a farming village where men work in the fields and women do household production. If the demand for food goes up, what happens in (a) the market for farm labor and (b) the village marriage market? Carefully explain your answer. Make sure that your diagrams are clearly labeled.



















2. State and explain a theoretical EXCEPTION to the rule that market forces eliminate discrimination. Use an example from Thomas Sowell (Race and Culture) to illustrate your answer.