Economics 321 Final

Prof. Bryan Caplan

Fall, 2011




·        You have 75 minutes to complete this exam. 

·        Write all answers directly on the 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 scientists invent an affordable robot for household cooking and cleaning. 


T, F, and Explain:  Workers’ overall wages would fall, and the price of men in the marriage market would rise.











2.  Some opponents of illegal immigration favor a large increase in the minimum wage, combined with harsh punishments for employers who pay below minimum wage.


T, F, and Explain:  This would increase unemployment for all workers, but with an especially large effect on illegal immigrants.












3.  T, F, and Explain:  The signaling model of education implies that high income taxes are less inefficient than they seem.







4.  Suppose that straight workers (but not straight employers) strongly dislike gays.  Assume that gay and straight workers are equally productive, and there are no anti-discrimination laws.


T, F, and Explain:  Employers will ignore straight workers’ preferences because they conflict with profit-maximization.











5.  Some strongly disliked minorities, like the Jews in pre-war Germany and the Japanese in post-war America, actually earned above-average incomes.


T, F, and Explain:  This proves that discrimination had no effect on the disliked minorities’ earnings.











6. Evolutionary psychologists often say that women are “hypergamous.”


T, F, and Explain:  If evolutionary psychologists are correct, women’s increasing educational and financial success will definitely increase the demand for “high-quality” men, but could easily decrease the demand for “low-quality” men.










Part 2: Short Answer

(20 points each)

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


1.  Imagine I gave everyone in Labor Economics a grade of “A.”  How would this affect my students’ future careers according to (a) human capital theory, and (b) the signaling model?




















2.  Selfish Reasons to Have More Kids implies that the ‘most rational’ parents in America are the Amish, who have eight children on average.”  Is this a correct reading of Caplan’s main argument?  Why or why not?