Question 1

Normative economics

Accepted Answer

Normative economics deals with value judgments and opinions, focusing on what should be rather than what is. It contrasts with positive economics, which describes and explains economic phenomena without making judgments.

Question 2

An approach to economics that applies statistical techniques and data to economic problems is called

Accepted Answer

Empirical economics involves the use of data and statistical methods to analyze economic phenomena and test economic theories. This approach contrasts with theoretical or normative economics, which focuses on what ought to be rather than what is observable and measurable.

Question 3

Which of the following is an example of a positive statement?

Accepted Answer

Positive statements are objective statements that can be tested, amended, or rejected by referring to the available evidence. B) "Higher prices cause consumers to purchase less" is a positive statement because it describes a cause-and-effect relationship that can be tested and verified through observation or data.

Question 4

Which of the following is an example of a normative question?

Accepted Answer

Normative questions involve judgments about what ought to be and are concerned with prescribing policies or actions. Option C, asking whether the government should provide free prescription drugs to lower-income citizens, is a normative question because it involves a judgment about what the government's policy should be.

Question 5

Related to the Economics in Practice on page 10: A study on the effect of roommates on college grades found that there were strong roommate effects on grade point average, effort in school, and fraternity membership. Which of the following is an example of a normative statement concerning this study?

Accepted Answer

Normative statements are value judgments or opinions that cannot be tested or proven. Choice D is a normative statement because it suggests what students "should" do based on a value judgment about maintaining high grades, rather than stating a fact or outcome of the study.

Question 6

The amount of exercise that one gets is an important factor in the determination of his general state of health. This is best described as

Accepted Answer

This is a positive statement because it describes a relationship between exercise and health without making a judgment about what ought to be. Positive statements are factual assertions about the world.

Question 7

Which of the following is an example of a normative statement?

Accepted Answer

Normative statements are subjective and express opinions or values, stating how things should be. Choice B, "There should be no unemployment in an advanced industrial society," is an example of a normative statement because it reflects a value judgment about what ought to be, rather than an objective fact or a testable hypothesis.

Question 8

Which of the following is a question answered with positive economic analysis?

Accepted Answer

Positive economic analysis deals with what is or what will happen as a result of certain actions, without making judgments about whether those outcomes are desirable. Option C, asking if class size will decline if tuition is increased, is a question that can be answered by observing or predicting factual outcomes, making it a positive economic analysis.

Question 9

The government should increase the minimum age for collecting Social Security benefits. This statement is best described as

Accepted Answer

This statement is a normative statement because it expresses a value judgment about what ought to be, rather than stating a fact or a cause-and-effect relationship that can be tested or validated.

Question 10

The four criteria that are frequently used in judging the outcome of economic policy are

Accepted Answer

The four criteria frequently used in judging the outcome of economic policy are efficiency (how well resources are used), equity (the fairness of resource distribution), stability (the avoidance of large economic fluctuations), and economic growth (the increase in the economy's ability to produce goods and services over time).

Question 11

A change in economic output is potentially efficient

Accepted Answer

A change in economic output is considered potentially efficient if the value of the gains exceeds the value of the losses, as this suggests that those who gain could in theory compensate those who lose and still be better off, aligning with the concept of Pareto efficiency.

Question 12

There is a possibility that a national sales tax will be implemented. Many economists argue that items such as food and clothing should be exempt from such a tax because low-income people spend a greater percentage of their income on these goods than do high-income individuals. This argument is motivated by concerns over

Accepted Answer

The argument is motivated by concerns over equity, as it focuses on the fairness of the tax system in relation to the burden placed on low-income individuals compared to high-income individuals.

Question 13

There is great concern over the fact that global warming is causing permanent damage to the global environment. A study of the costs and benefits of purchasing carbon offsets to combat global warming is an example of

Accepted Answer

A study of the costs and benefits of purchasing carbon offsets to combat global warming is an example of positive economics because it involves the analysis of factual information and the impact of economic decisions, without making judgments about what ought to be. Positive economics deals with objective analysis based on data.

Question 14

Temperature is a measure that changes from time to time and is therefore an example of a(n)

Accepted Answer

Temperature is a variable because it is a quantity that can change or vary over time and across different situations or conditions. Variables are fundamental in research, statistics, and scientific experiments to measure changes, effects, or outcomes.

Question 15

Which of the following is a question answered with normative economic reasoning?

Accepted Answer

Normative economic reasoning involves value judgments or opinions about what ought to be or what should be done. Choice D, "Should the college cut tuition to stimulate enrollment?" is a normative statement because it involves a recommendation or judgment about policy. Choices A, B, and C are examples of positive economic reasoning, which deals with what is, can be, or will be, based on factual statements or hypotheses.

Question 16

Related to the Economics in Practice on page 10: Prior to joining a fraternity, James spent most of his evenings and weekends studying for his classes. Once he joined the fraternity, James spent a majority of his evenings and weekends going to parties. This change in behavior is best described by

Accepted Answer

The change in James's behavior from studying to partying after joining a fraternity illustrates the problem of causality, which involves determining whether one event actually causes another or if the two events are merely correlated.

Question 17

The reoccurrence of contagious diseases should be significantly lower in a technically advanced nation such as the United States. This statement is best described as

Accepted Answer

A normative statement expresses a value judgment about whether a situation is desirable or undesirable. It looks at the world as it "should" be. The given statement is a judgment about what should be expected in a technically advanced nation, making it a normative statement.

Question 18

You have noticed that there is an increase in the number of homeless people in your city. At the same time you observe that there are also a number of vacant apartments. You believe that the government could reduce the number of homeless people if landlords were required to rent their apartments for less than they are currently charging. This policy recommendation would be motivated by concerns over

Accepted Answer

This policy recommendation is motivated by concerns over equity, as it focuses on fairness and the distribution of resources to reduce homelessness, rather than efficiency, economic growth, or stability.

Question 19

An efficient economy is an economy

Accepted Answer

An efficient economy is defined by its ability to produce what is demanded by consumers at the lowest possible cost, maximizing productivity and minimizing waste. Choices A, C, and D describe other desirable economic attributes but do not directly define efficiency.

Question 20

An efficient market is characterized by the fact that

Accepted Answer

In an efficient market, prices reflect all available information, so profit opportunities from undervalued or overvalued assets are quickly exploited by traders and corrected, making these opportunities disappear almost instantaneously.

Quiz 1: The Scope and Method of Economics