Multiple Choice
In the context of positive analysis, what does it mean to say that two variables are positively associated?
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0. Basic Principles of Economics
Positive and Normative Analysis
Multiple Choice
When a government conducts a cost-benefit analysis, it must consider:
A
only positive analysis, ignoring any value judgments
B
both positive analysis (what is) and normative analysis (what ought to be)
C
neither positive nor normative analysis
D
only normative analysis, disregarding factual outcomes
Verified step by step guidance1
Step 1: Understand the difference between positive and normative analysis. Positive analysis deals with objective, fact-based statements about 'what is,' while normative analysis involves subjective value judgments about 'what ought to be.'
Step 2: Recognize that a cost-benefit analysis involves evaluating the actual costs and benefits (positive analysis) and also making decisions based on values or goals (normative analysis).
Step 3: Identify that ignoring either positive or normative analysis would lead to an incomplete evaluation because cost-benefit analysis requires both factual assessment and value-based decision-making.
Step 4: Conclude that the government must consider both positive analysis (to understand the factual impacts) and normative analysis (to decide what policies should be implemented based on those impacts).
Step 5: Therefore, the correct approach in cost-benefit analysis is to incorporate both positive and normative analysis.
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