Economics
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Question from Past Microeconomics Qualifying Exam[]

Fall 2000 - Section I, Question four, George Mason University

True, False, Uncertain. Determine whether or not each of the following statements are true or false. Explain your reasoning briefly in a paragraph or two. (The explanation is often more important than the answer given). Include a carefully labeled diagram or game matrix if it helps to clarify your answer.


An increase in the rate of divorce tends to cause GDP to fall.

Answer[]

Uncertain. Marriage increases efficiency in certain transactions, such as security, comfort, and sex, by lowering transaction cost. It also encourages specialization of labor, which is efficiency increasing. However, with the specialization of labor through marriage, many transactions that are accounted for in GDP get subsidized by transactions that are not accounted for in GDP, such as meals at restaurants for meals at home, or with legalized prostitution, sex with prostitutes for sex at home.

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