Economics 321 Final

Prof. Bryan Caplan

Fall, 2006




        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. T, F, and Explain: Krugman's The Accidental Theorist shows that economists deeply disagree about the effects of labor market regulation.












2. Some unions impose work rules that reduce the MPP of labor (for example, a rule that only a licensed electrician is allowed to change a lightbulb).


T, F, and Explain: This is never in the self-interest of union members.












3. T, F, and Explain: Statistical discrimination reduces the return to education for members of groups with below-average productivity.










4. Inside the European Union, there is free migration, but labor markets are heavily regulated.


T, F, and Explain: Under these conditions, discrimination against "foreigners" (for example, discrimination by German employers against Italian workers) is relatively cheap, which in turn reduces the level of international migration.












5. Landsburg (Fair Play) argues that there are positive externalities of having children.


T, F, and Explain: Subsidizing education helps correct this externality even if education is just signaling.














6. T, F, and Explain: Raising income taxes causes crime.










Part 2: Short Answer

(20 points each)

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


1. Caplan argues that four "standard stories" (of labor, the welfare state, discrimination, and gender) are wrong. For which of these four stories does Caplan most over-state his case? Explain your answer.


















2. Suppose the "men's rights" movement persuades men that every man "deserves the very best" from the woman in his life, and should settle for nothing less. Diagram the effect of this "men's rights" norm on the marriage market from the female point of view. (Carefully label your diagram!) Who benefits from the men's rights movement? Who loses?