Positive Economic Statement, Comparative Advantage, Principles of Macroeconomics Quiz
The key terms in this Principles of Macroeconomics course include Positive Economic Statement, Comparative Advantage, Jonathan, Short-Run, Decision-Making, Apples, Principles of Macroeconomics Quiz
Which of the following is an example of a positive economic statement?
The poor should pay more taxes and the rich should pay lower taxes toward social security.
The Kardashians should not be allowed to be on television.
The average rainfall in August 2016 was 5 inches nationwide.
Congress should devote more resources to the environment.
Explanation:
In economics it is important to avoid letting personal beliefs and values influence the outcome of analysis. To be as objective as possible, scientists will use positive statements, which can be tested and validated. The statement about average rainfall is something that can be validated. All other statements are normative, which have embedded value judgements.
Which of the following would be consistent with taking the short-run approach to decision-making?
Studying for an economics test instead of going to a party
Going to the gym instead of watching TV
Eating a salad for dinner when it is your goal to eat healthily
Buying a new leather jacket instead of saving for retirement
Explanation:
In the short run, the individual is valuing the present over the future. Purchasing a leather jacket instead of saving for retirement is valuing future consumption over the value of the initial savings and the return on that savings in the long run.
Which of the following statements is consistent with Jonathan having a comparative advantage in producing apples?
Jonathan can sell apples at a lower price than anyone else and still make a profit.
Jonathan’s opportunity cost for producing apples is lower than anyone else’s.
Jonathan can produce more apples (by weight) than anyone else.
Jonathan can produce more apples (by volume) than anyone else.
Explanation:
The person with the comparative advantage is always the one with the lowest opportunity cost. This means Jonathan has a comparative advantage in producing apples if he gives up less production of other goods when he produces apples.
Which of the following would be consistent with taking the short-run approach to decision-making?
Studying for an economics test instead of going to a party
Going to the gym instead of watching TV
Eating a salad for dinner when it is your goal to eat healthily
Buying a new leather jacket instead of saving for retirement
Explanation:
In the short run, the individual is valuing the present over the future. Purchasing a leather jacket instead of saving for retirement is valuing future consumption over the value of the initial savings and the return on that savings in the long run.