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Chapter 1: Q 14 (page 16)

Based on your answer to Problems 1鈥�12, categorize each of the following conclusions as being the result of positive analysis or normative analysis.

(a) A higher minimum wage will reduce employment opportunities for minimum wage workers.

(b) Increasing the earnings of minimum wage employees is desirable, and raising the minimum wage is the best way to accomplish this.

(c) Everyone should enjoy open access to health care at no explicit charge.

(d) Heath care subsidies will increase the consumption of health care.

Short Answer

Expert verified

(a) Positive Analysis

(b) Normative Analysis

(c) Normative Analysis

(d) Positive Analysis

Step by step solution

01

Step 1. Positive and Normative Analysis.

Positive analysis refers to descriptive facts and statements whereas Normative analysis is based on the judgments of economic policies.

02

Step 2. Categorize.

(a) This is a positive analysis since it is descriptive and does not require any judgment.

(b) This is a normative analysis because it involves the judgment of how can earnings be increased.

(c) This is a normative analysis as it contains the condition that everyone should enjoy open access to no explicit costs.

(d) This is a positive analysis since the condition is purely descriptive on the increasing healthcare subsidies.

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Most popular questions from this chapter

Define economics. Explain briefly how the economic way of thinking鈥攊n terms of rational, self-interested people responding to incentives鈥攔elates to each of the following situations.

(a) A student deciding whether to purchase a textbook for a particular class.

(b) Government officials seeking more funding for mass transit through higher taxes.

(c) A municipality taxing hotel guests to obtain funding for a new sports stadium.

Under what circumstances might people appear to use rules of thumb, as suggested by the assumption of bounded rationality, even though they really were behaving in a manner suggested by the rationality assumption?

Which of the following predictions appear(s) to follow from a model based on the assumption that rational, self-interested individuals respond to

incentives?

(a) For every 10 exam points Myrna must earn in order to pass her economics course and meet her graduation requirements, she will study one additional hour for her economics test next week.

(b) A coin toss will best predict Leonardo鈥檚 decision about whether to purchase an expensive business suit or an inexpensive casual outfit to wear next week when he interviews for a high-paying job he is seeking.

(c) Celeste, who uses earnings from her regularly scheduled hours of part-time work to pay for her room and board at college, will decide to buy a newly released DVD this week only if she is able to work two additional hours.

In a single sentence, contrast microeconomics and macroeconomics. Next, categorize each of the following issues as either a microeconomic issue, a macroeconomic issue, or not an economic issue.

(a) The national unemployment rate.

(b) The decision of a worker to work overtime or not.

(c) A family鈥檚 choice to have a baby.

(d) The rate of growth of the money supply.

(e) The national government鈥檚 budget deficit.

(f) A student鈥檚 allocation of study time across two subjects.

For each of the following approaches that an economist might follow in examining a decision-making process, identify whether the approach relies on the rationality assumption or on the assumption of bounded rationality:

(a) An economic study of the number of online searches that individuals conduct before selecting a particular item to purchase online presumes that people are interested only in their own satisfaction, pursue their ultimate objectives, and consider every relevant option.

(b) An economist seeking to predict the effect that an increase in a state's sales tax rate will have on consumers' purchases of goods and services resumes that people are limited in their ability to process information about how the sales-tax-rate increase will influence the after-tax prices those consumers will pay.

(c) To evaluate the impact of an increase in the range of choices that an individual confronts when deciding among devices for accessing the Internet, an economic researcher makes the assumption that the individual is unable to take into account every new Internet-access option available to her.
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