Exercises 1. Q1: What is neoclassical economics concerned about?

A)

Q1: What is neoclassical economics concerned about?

(a) mostly the short-term tendencies of the economy

(b) long-term tendencies of the economy

(c) technological change and innovation

(d) equilibrium situations

Q2: Why should change be an immanent area of interest of neoclassical economics?

(a) the long-term tendencies of the market cannot be understood without having an eye on the changes of the global economy

(b) technology is not available for each country

(c) a static analysis is not able to provide a full-fledged understanding of the real world phenomena of globalised economy

(d) the short-term tendencies of technology cannot be understood without having an eye on the changes of global economy

Q3: Why is neoclassical economics blind to the long-term tendencies of market economy?

(a) long-term tendencies are simply not relevant

(b) a comparative static analysis cannot be used or not properly

(c) long-term tendencies are hard to model

(d) long-term tendencies are much more related to history, institutions, etc.

Q4: Which assumptions would neoclassical economics take as valid?

(a) history or geography do not matter

(b) time or geography are irrelevant

(c) change in demand is irrelevant

(d) change in individuals’ behaviour does not matter

Q5: According to the book, to which directions should economics be more open in the future?

(a) mathematics

(b) geography

(c) history

(d) econometrics

Q6: What are the most important shortcomings of neoclassical economics?

(a) it neglects the study of the role of the state

(b) it neglects the study of changes in taste and technology

(c) it neglects the study of changes in human behaviour

(d) it neglects the scrutiny of demand and supply

Q7: Which of the following assumptions have been recently challenged by the new economic theories?

(a) perfect competition

(b) diminishing marginal productivity of factors

(c) constant return to scale

(d) rational behaviour

Q8: Among other things, the new theories have harshly attacked the assumption of constant return to scale. Why?

(a) because of the prevalence of so-called increasing return to scale

(b) because unit costs may decline as the quantity of production increases

(c) because information is not complete

(d) because firms are not alike

Q9: The neoclassical assumption of perfect competition has also been criticised seriously. According to the new theories, which type(s) of the market is/are more relevant in reality?

(a) monopolistic

(b) individual

(c) oligopolistic

(d) atomistic

Q10: What do the new theories claim regarding the role of the state?

(a) governments cannot play a crucial role in economic affairs

(b) governments try to play a crucial role in economic affairs, but they necessarily fail to achieve any results

(c) governments are not interested in playing a role in economic affairs

(d) governments can (and do) play a crucial role in economic affairs

B) In the following, you will find several statements. Decide whether these statements are true or false.

Q1: Mainstream economics do not pay sufficient attention to technological change and innovation. TRUE

Q2: According to the new economic theories, historical accidents may have a significant influence in the build-up of certain economic institutions. (p. 105-6) TRUE

Q3: In principle, the new economic theories reflect an evolutionary development in economic thinking, since these new theories have been derived directly from the neoclassical theory. (p. 106) FALSE (because the new theories try to modify the presumptions and conclusions of neoclassical economics)

Q4: The new economic theories are based on the assumption of perfect competition. (p. 106-7) FALSE (because they have been built upon the assumption of imperfect competition)

Q5: The term “oligopolistic competition” means that markets are dominated by a few producers only. (p. 107) TRUE

Q6: The recognition of the importance of technological innovation puts the government and its economy-related activities into the focus of analysis. (p.108) TRUE

Q7: “Technonationalism” refers to the defensive attempt of governments to reserve certain (advanced) technologies to themselves, thereby hampering the diffusion of knowledge among (other) nations. (p. 108) TRUE

Q8: For neoclassical economists, both time and space represent an important role in determining economic successes and failures across countries and over time. (p. 108) FALSE (because these two factors are handled as irrelevant)

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