Multiple Choice
Which of the following statements best illustrates a normative analysis regarding the decision to take a job with a high salary and few benefits?
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0. Basic Principles of Economics
Positive and Normative Analysis
Multiple Choice
Which of the following statements about producing plastics is an example of positive economic analysis?
A
Producing plastics increases GDP and creates jobs in the manufacturing sector.
B
Society would be better off if plastic production was banned.
C
Producing plastics is harmful and should be discouraged by the government.
D
The government ought to subsidize alternatives to plastic production.
Verified step by step guidance1
Step 1: Understand the difference between positive and normative economic analysis. Positive economics deals with objective, fact-based statements that can be tested or verified, while normative economics involves value judgments or opinions about what ought to be.
Step 2: Identify the statements that are purely factual and can be tested. For example, 'Producing plastics increases GDP and creates jobs in the manufacturing sector' is a statement that can be verified with data.
Step 3: Recognize that statements like 'Society would be better off if plastic production was banned' or 'Producing plastics is harmful and should be discouraged by the government' involve value judgments and are normative.
Step 4: Similarly, 'The government ought to subsidize alternatives to plastic production' is a prescriptive statement expressing what should happen, which is normative.
Step 5: Conclude that the example of positive economic analysis is the statement that describes measurable economic outcomes without expressing opinions or recommendations.
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