Deck 1: Introduction

Question 1

To say that one policy is better than another because it is more efficient is a normative,not a positive,statement.

Answer 1

True
It is a positive statement to say that one policy is more efficient than another --- but judging the policy as "better" involves value judgments that make the statement a normative one.

Question 2

Positive economics can tell us which policies are efficient and which are not.

Answer 2

True
Efficiency is an objectively defined concept: A situation is efficient if there is no way to make some people better off without making others worse off.To say that one situation is more efficient than another is not a normative statement --- even if often people think it is the same as saying that one situation is better than another.

Question 3

If medical patients are rational (in the way economists think of the term),they will do what medical experts believe is best for them.

Answer 3

False
A rational patient's view of what is "best" may differ from a medical expert's view --- and thus the patient may rationally violate the expert's advice.

Question 4

Economists talk about tradeoffs a lot because they have come to understand that whenever there is a winner from a policy or transaction,there must also be a loser.

Question 5

When economists say that policy A is more efficient than policy B,they mean policy A is better than policy B.

Question 6

One of the aims of positive economics is to rank policies under consideration from most desirable to least desirable.

Question 7

When economists assume that people are rational,they are assuming that people generally agree what is good for human beings.

Question 8

Suppose two models give the same predictions --- but one is simplistic and unrealistic in its assumptions while the other is rich in detail and resembles the real world more closely.If the sole goal of the economist is to predict,then the economist should use the simple and unrealistic model.

Question 9

If two individuals voluntarily agree to a transaction that only affects them (and no one else),it must be that the transaction is efficient.

Question 10

A spontaneous order emerges from individual decisions that cause something to "work" without anyone planning for it to "work".