Multiple Choice
Which of the following best describes what might happen to a country's economy and standard of living without property rights?
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0. Basic Principles of Economics
Positive and Normative Analysis
Multiple Choice
Which of the following statements is a valid economic conclusion based on positive analysis?
A
Raising the minimum wage is unfair to small businesses.
B
The government should increase the minimum wage to improve living standards.
C
It is morally right to ensure all workers earn a living wage.
D
An increase in the minimum wage will lead to higher unemployment among low-skilled workers.
Verified step by step guidance1
Understand the difference between positive and normative analysis in economics. Positive analysis deals with objective, testable statements about how the economy works, while normative analysis involves subjective opinions about what ought to be done.
Identify that positive statements can be verified or falsified through data and evidence, such as "An increase in the minimum wage will lead to higher unemployment among low-skilled workers." This is a hypothesis that can be tested.
Recognize that normative statements express value judgments or opinions, such as "Raising the minimum wage is unfair to small businesses" or "The government should increase the minimum wage to improve living standards." These cannot be tested purely by data.
Evaluate each statement in the problem to classify it as positive or normative. The valid economic conclusion based on positive analysis is the one that makes a testable claim about cause and effect.
Conclude that the statement "An increase in the minimum wage will lead to higher unemployment among low-skilled workers" is a positive economic statement because it predicts an outcome that can be empirically examined.
