Study Questions For The Fifth Quiz

ECON 307

These questions are not designed to take the place of studying your notes and the reading assignments.  Do not e-mail me and ask me to answer all or some of these questions for you.  If you have missed class, it is your responsibility to get the notes from another student.  Once you have answered these questions yourself, if you are unsure of any of your answers, let me know and I will tell you if you are correct or not.  Don't be afraid to ask me questions, I just want you to try to answer the questions yourself first.

Topic:  Ricardo

1. According to Ricardo, there are two prices of labor -- the natural price and the market price.  What is the difference?  When might they differ from each other and when are they the same?
2. What was Ricardo's wage fund and why did productivity increase wages according to Ricardo?
3. What did the demand for labor depend upon?  What did the supply of labor depend upon?
4. According to Ricardo, if the market price exceeded the natural price of labor (because, for example the demand for labor increased - why would that happen?) what would happen in the labor market (according to Ricardo)? When would this change be temporary and when would it be permanent?  Explain both in words and graphically.  Another way of asking this question is:  Under what circumstances would the natural price of labor increase permanently?
5. Why was Ricardo concerned with distribution of income between capital and labor?  Relate your answer to productivity.
6. Ricardo is credited with discussing the theory of diminishing marginal returns.  There were two different interpretations of his theory - explain both.
7. Ricardo's diminishing returns could be due to two different things happening.  What are they?  Explain both.  In your answer discuss how the amount of land was important to Ricardo's theory.
8. How was rent determined, according to Ricardo.
9. According to Rothbard and others, Ricardo really didn't come up with or at least, emphasize, the theory of comparative advantage.  Who did?
10. What is absolute advantage?  Comparative advantage?  Make sure you understand and can explain an example of comparative advantage.
11. Did Ricardo believe in Say's Law?  Explain.
12. According to Ricardo, an economic slump (stationary state) was not due to under-consumption, but not enough productivity.  Therefore how did Ricardo use: 1. Malthus theory of population and 2. diminishing marginal returns, to explain an economic slump.  You should have 7 steps here (beginning with capital investment and wages being high).  Again, how did the amount of land available play into this theory.  If fertile agricultural land was never scarce, would this change Ricardo's theory?  Explain.

Topic:  Mill (and Taylor)

1. On method, did Mill like the inductive or deductive method?
2. Mill is known for adding the idea of ceteris paribus to understanding economic theory -- what does that mean?
3. Who is Mill's "economic man?"  Can you relate this idea to modern day theory and also critique this idea?
4. Mill separated the laws of production with the laws of distribution.  Which laws were unchangeable and governed by natural laws and which laws were a matter of changing values, mores, tastes, social philosophies?
5. What is Mill's equilibrium interpretation of Say's law?  What did he add to the Savings = Investment theory?  Use a circular flow diagram AND a supply/demand type graph to explain it.
6. Mill was one of the first to discuss what is now called "crowding out" - a theory as to why deficit spending by the government could be anti-productive (especially long-run and extensive deficit spending).  What was his argument and how is the model interpreted today (graphically and in words)?
7. What were Mill's exceptions to this opportunity cost argument?  What was his "index" or "signal" used to discover if the government deficit was competing with private investment or not?  Explain (this relates to the question above).
8. Like Ricardo, Mill thought the economy could get to a stationary state, but he didn't think it was necessarily a bad state of affairs.  Why?
9. Mill liked capitalism and economic growth in general, but how did he differ from other Classical economists with respect to economic distribution?
10. Economic distribution was important to Mill but so we individual liberty.  Why could these be at odds with each other?
11. Did Mill like inheritance?  Why or why not?  What did he recommend and why?  In your answer, make Mill's distinction between income and wealth.
12. What was Mill's basic take on equality between the sexes?
13. Who was Mill married to (after a long friendship) and whom is also thought to be co-author on some of his books?
14. What were Mill's ideas regarding taxes?
15. What were Mill's necessary functions of government?

Topic:  Socialists

1. Define Socialism (as Mill did and as most economists do today). 

2. Explain some major "themes" among the socialists with respect to how they differed from the Classical School in general or just in terms of their method regarding:

   a.  the emphasis on the individual vs. classes or society in general

   b.  their view of property rights and wealth distribution

   c.  their view of the relationship between workers and capitalists - was their a "harmony" of interests or not?

3. According the Socialists of the time, what was wrong with capitalism?  Can you relate these arguments to arguments you hear today?

4. What were some of the solutions (changes to the system) that the socialists suggested?

Topic:  Marx (we will see how far we get on this)

1. Marx's ideas regarding "dialectics" came from which philosopher?

2. Marx's ideas regarding "materialism" came were influenced by which philosopher?

3. What is the general idea of Marx's "dialectical materialism"?

4. What is the "prime mover of history" according to Marx ?  Because of this prime mover -- all culture, law, etc. follows from it.  Explain.  Include the "social pyramid" in your answer.

5. How would communism be different from capitalism, according to Marx (in terms of how people would live their lives)?

6. Provide an example of something that "alienates" us from our true selves (under capitalism) according to Marx? 

7. What does Marx mean by "spiritual alienation"?

8. What does Marx mean by "social alienation"?

9. How do "adaptive preferences" fit into spiritual alienation?

10. Marx viewed Smith's invisible hand as being a negative thing, not a positive thing.  Explain.

11. How does Marx define capitalism?

12. Marx saw capitalism as being very productive -- necessary and making collectivization possible.  But the capitalists would not go quietly - why?

13. According to Marx, history progresses through or because of what?

14. In his writings Marx was trying to show (basically) three things -- what are they?

15. According to Marx, prices reflect what?
16. What is socially necessary value (or labor)?  Regardless of how long workers worked during the day, they would get paid a day wage -- what determined it?
17. In a working day, what was the minimum amount of time and why?  What was the maximum amount of time and why?
18. Use value would be part of the price the output sold for.  This would be greater than the necessary value -- this difference would be called what?
19. How did Marx "measure" exploitation?  Why was it considered "exploitation"?
20. Since Marx's analysis was in terms of people, not things, where did the value of capital and machinery come from?
21. Why would capitalists want to invest in more capital if labor created value?
22. Why does competition lead to the rates of profit falling?  Marx mentioned two things here.
23. Fill in the blank:  According to Marx, capitalism contains the seeds to its own destruction.  The Labor Theory of Value - Exploitation - Competition/Capital for Labor and Increased Wages - Decrease in Profits - More ___________________ (continued in next question) -
24. Increase in the Working Class - ___________________ - Revolution!!