Question 1

"As soon as a mayor announced his/her 'get tough on crime' policy on New Year's day, criminals got scared and the crime rate went down." Suppose that the lower crime rate was actually caused by freezing cold temperatures in January-it was just too cold for anybody to be out robbing other people. Which fundamental hazard of the economic way of thinking did the mayor make?
A) believing that what's good for one person is good for the whole group (the fallacy of composition)
B) failing to take into account the benefits of crime (the payoff fallacy)
C) believing that association is the same as causation
D) failing to understand the difference between positive and normative economics.

Accepted Answer

The mayor mistakenly believed that the announcement of a policy was the cause of the decrease in crime rate, failing to recognize that it was actually the weather that caused it. This demonstrates the hazard of believing that association is the same as causation.

Question 2

A positive economic statement is:
A) an opinion of an action that should be taken.
B) an action that will have a positive effect on the economy.
C) a statement testable by facts.
D) a claim that the speaker is positive will occur.
E) always a microeconomic position.

Accepted Answer

A positive economic statement is a statement that can be tested by facts and is objective rather than subjective. It is not an opinion on what actions should be taken, nor is it necessarily a guarantee of a positive outcome. It can apply to both micro and macroeconomics.

Question 3

"An increase in the federal minimum wage will provide a living wage for the working poor" is:
A) a statement of positive economics.
B) a fallacy of composition.
C) a tautology.
D) a statement of normative economics.

Accepted Answer

This statement is a normative statement, as it is an opinion about what should be done to address poverty among the working poor. It is not a factual statement about the minimum wage or its effects.

Question 4

Which of the following is a statement of positive economics?
A) Too much government spending is the biggest problem facing the U.S. economy.
B) Creating jobs is the most serious problem facing the U.S. economy.
C) Raising taxes provides additional revenue that should be used to finance health care.
D) If taxes are over 50 percent of national income, job creation falls.

Accepted Answer

Option D is a statement of positive economics because it presents a cause-and-effect relationship between taxes and job creation. It is a factual statement that can be tested through empirical analysis. On the other hand, options A, B, and C are normative statements because they express opinions about what should or should not be done, rather than describing economic realities.

Question 5

Which of the following is a statement of positive economics?
A) I hope unemployment comes down soon.
B) President X's way of dealing with unemployment is better than President Y's.
C) I think everyone should sacrifice to reduce the deficit.
D) If taxes are reduced, unemployment will drop.

Accepted Answer

A statement of positive economics is based on facts and cause-and-effect relationships. Option D provides a causal relationship between tax reduction and a likely drop in unemployment, making it a statement of positive economics. Options A, B, and C, on the other hand, are normative statements based on personal opinions or preferences.

Question 6

What type of economic analysis is limited to testable, verifiable statements?
A) Macroeconomics.
B) Entrepreneurial economics.
C) Positive economics.
D) Normative economics.

Accepted Answer

Positive economics is the type of economic analysis that focuses on testable and verifiable statements. It deals with objective analysis of economic facts and does not make value judgments.

Question 7

Which of the following represents a positive statement?
A) A higher income tax rate will reduce the amount of time that people spend working.
B) Teenage unemployment should be reduced.
C) We should raise the standard of living for the elderly.
D) A decrease in tax rates is needed to help the poor.

Accepted Answer

Option A is a positive statement because it is a statement of fact that can be supported by data or evidence. It does not express a value judgment or suggest a preferred course of action. Options B, C, and D are normative statements because they express a value judgment and suggest a preferred course of action.

Question 8

The Secretary of Labor states that wage rates in the country have risen by 2 percent this past year. The head of a local labor union states that wage gains should have been higher. The Secretary's statement is a (n) ____ economic statement, and the labor head's statement is a (n) ____ economic statement.
A) normative; normative
B) normative; positive
C) positive; normative
D) positive; positive
E) proper; improper

Accepted Answer

The Secretary of Labor's statement is a positive economic statement as it reports an objective fact or statistic regarding the rise in wage rates. On the other hand, the labor union head's statement is a normative economic statement because it includes an opinion or value judgment on what wage gains "should have been" according to their perspective.

Question 9

Which one of the following is a positive economic statement?
A) An increase in the minimum wage will reduce employment for teenagers.
B) The minimum wage should be increased.
C) Social justice will be served by increasing the minimum wage.
D) Thoughtful people oppose an increase in the minimum wage.

Accepted Answer

A positive economic statement is a factual statement that can be tested and proven true or false. "An increase in the minimum wage will reduce employment for teenagers" is a positive economic statement because it can be tested through data and research to see if it is true or false. The other options, B, C, and D, are normative statements that express opinions or beliefs and cannot be proven true or false.

Question 10

If individuals who sit in the back of the classroom receive lower grades on average than the rest of the class, does that mean that sitting in the back of a classroom causes one to perform poorly on exams?
A) Not necessarily. The reoccurrence of a certain relationship between two variables does not necessarily imply causation.
B) It is not possible for an economist to determine causation between variables.
C) The reoccurrence of such a relationship is sufficient evidence that sitting in the back of a classroom will lead to lower grades.
D) The reoccurrence of such a relationship is sufficient evidence that students who receive low grades prefer to keep a low profile and always sit in the back of the classroom.

Accepted Answer

Just because there is a correlation between sitting in the back of the classroom and lower grades, it does not mean that sitting in the back causes lower grades. There could be other factors at play, such as students who struggle with the material choosing to sit in the back. Therefore, it is important to consider other variables before concluding that one causes the other.

Question 11

Which of the following represents positive economics?
A) Policy A is fair.
B) Outcome B is the best objective to achieve.
C) If policy A is followed, then outcome B results.
D) All of these.

Accepted Answer

Positive economics is concerned with objective analysis that is based on empirical evidence and facts. Therefore, statement C is the only option that presents a cause-and-effect relationship that can be objectively tested and verified. Statements A and B involve value judgments, which are subjective and cannot be tested objectively, and are therefore not characteristic of positive economics.

Question 12

Someone notices that sunspot activity is high just prior to recessions and concludes that sunspots cause recessions. This person has:
A) confused association and causation.
B) misunderstood the Ceteris paribus assumption.
C) used normative economics to answer a positive question.
D) built an untestable model.

Accepted Answer

This person has confused the association between sunspot activity and recessions with the idea that sunspots cause recessions. Just because two things are associated with each other does not necessarily mean that one causes the other. There could be other factors at play.

Question 13

Which of the following is a statement of positive economics?
A) Government control of rent is a fair way to help poor people afford housing.
B) Government control of rent keeps landlords from charging too much rent.
C) Government control of rent decreases the number of new apartments constructed.
D) Government control of rent is an injustice.

Accepted Answer

Positive economics deals with objective analysis and facts. Statement C is a factual claim that can be tested or verified, unlike the normative statements in A, B, and D.

Question 14

Which of the following is a positive statement?
A) I think we should pass a constitutional amendment to reduce the deficit.
B) President Clinton's way of dealing with the economy is better than President Bush's.
C) I hope interest rates come down soon.
D) If taxes are raised, unemployment will drop.

Accepted Answer

D is a positive statement because it presents a cause and effect relationship that can be tested and proved. The statement suggests that if taxes are raised, unemployment will drop, which is a positive outcome. A positive statement is a statement that can be objectively tested and proved or disproved based on facts or evidence.

Question 15

Positive economics is a(n):
A) reflection of a country's values.
B) judgment of the correctness of an economic outcome.
C) statement of fact.
D) analysis of what ought to be.
E) analysis of all the good market outcomes.

Accepted Answer

Positive economics deals with impartial analysis of economic facts and data without any value judgments or subjective opinions. It presents a statement of objective reality and focuses on "what is" rather than "what ought to be."

Question 16

"An increase in the federal minimum wage causes an increase in unemployment among teenagers" is a:
A) statement of positive economics.
B) statement of normative economics.
C) testable value judgment.
D) fallacy of composition.

Accepted Answer

This statement is a statement of positive economics, as it is a factual claim that can be tested against empirical evidence. The claim can be tested by comparing unemployment rates among teenagers before and after an increase in the federal minimum wage.

Question 17

Ceteris paribus means:
A) an association of variables.
B) all other things remain constant.
C) a cause and effect relationship.
D) considering the influences of other variables.

Accepted Answer

Ceteris paribus means "all other things remain constant." It is a Latin phrase commonly used in economics to describe a situation where one variable is changed while all other variables are held constant. It is used to isolate the effect of a particular variable on a system or outcome.

Question 18

Positive economics:
A) will usually tell us which policy is best.
B) reveals "what ought to be" in economic matters.
C) is of little use to policy makers.
D) is the scientific study of "what is" among economic relationships.

Accepted Answer

Positive economics is the scientific study of "what is" among economic relationships, focusing on describing and explaining economic phenomena without making value judgments or prescribing how things should be. It helps to understand the economic realities and to form the basis of sound economic policy decisions. Therefore, option D is the correct answer.

Question 19

Select the positive statement that completes the sentence: If wages rise more rapidly than productivity:
A) profits will fall.
B) workers will earn 3/4 of GDP.
C) the rate of inflation increases.
D) all of these.

Accepted Answer

If wages rise more rapidly than productivity, it can lead to decreased profits, a higher share of GDP going to workers, and increased inflation, making all options correct.

Question 20

The statement, "Violent crime has decreased in the last five years," is:
A) obviously wrong and, therefore, cannot be a positive statement.
B) normative since it can be answered by simply looking at the facts.
C) positive because it is testable.
D) not very interesting because all normative issues are of little importance.

Accepted Answer

The statement is about a verifiable fact, and it is possible to collect data and test its accuracy. Therefore, it is a positive statement.

Quiz 1: Introducing the Economic Way of Thinking

A positive economic statement is:

"An increase in the federal minimum wage will provide a living wage for the working poor" is:

Which of the following is a statement of positive economics?

Which of the following is a statement of positive economics?

What type of economic analysis is limited to testable, verifiable statements?

Which of the following represents a positive statement?

The Secretary of Labor states that wage rates in the country have risen by 2 percent this past year. The head of a local labor union states that wage gains should have been higher. The Secretary's statement is a (n) economic statement, and the labor head's statement is a (n) economic statement.

Which one of the following is a positive economic statement?

If individuals who sit in the back of the classroom receive lower grades on average than the rest of the class, does that mean that sitting in the back of a classroom causes one to perform poorly on exams?

Which of the following represents positive economics?

Someone notices that sunspot activity is high just prior to recessions and concludes that sunspots cause recessions. This person has:

Which of the following is a statement of positive economics?

Which of the following is a positive statement?

Positive economics is a(n) :

"An increase in the federal minimum wage causes an increase in unemployment among teenagers" is a:

Ceteris paribus means:

Positive economics:

Select the positive statement that completes the sentence: If wages rise more rapidly than productivity:

The statement, "Violent crime has decreased in the last five years," is: