Question

1.Positive analysis

involves the formulation and testing of hypotheses.

involves value judgments concerning the desirability of alternative outcomes.

weighs the fairness of a policy.

examines if the outcome is desirable.

2.Because a price ceiling causes

a shortage, some form of rationing must occur.

a surplus, some form of rationing must occur.

a shortage, the outcome will be efficient.

a surplus, the outcome will be inefficient.

3.For a price ceiling to have an impact on a market, it

must be set above the equilibrium price.

must be set below the equilibrium price.

must be set anywhere besides the equilibrium price.

can lead more goods to be produced in a market.

4.A binding price ceiling

will cause quantity supplied to exceed quantity demanded.

will increase total well-being.

will set a legal minimum price in a market.

will cause quantity demanded to exceed quantity supplied.

7.A price floor is

a legal maximum price.

a legal minimum price.

the price which the legally-permissible price cannot go above.

a price which cannot legally be charged.

8.A binding price floor

will cause quantity demanded to exceed quantity supplied.

will cause quantity supplied to exceed quantity demanded.

will increase total well-being.

will set a legal maximum price in a market

17.A seller’s willingness to sell

is the maximum price that a seller is willing to accept in exchange for a good or service.

is the minimum price that a seller is willing to accept in exchange for a good or service.

is his or her reserved minimum bid-price.

must always equal the buyer’s willingness to buy.

18.The difference in the price the buyer pays and the price the sellers keep in the presence of a tax is called

the tax differential.

the tax wedge.

the tax incidence.

the tax burden

25.If the demand curve is more elastic than the supply curve, then

the buyers will bear a greater burden of the tax than sellers.

the sellers will bear a greater burden of the tax than buyers.

the tax burden will be shared equally.

the government will bear the greater share of the tax burden.

Answer 1

1.

The normative economics Statement is based on the ideological, opinion and value judgments. Its main objective is to summarize people's desire to various economic developments and situations by asking or saying that what should happen or what ought to be.

Since a positive statement can be defined as an objective statements which can be tested, amended or rejected by verifying the available evidence.

Hence it can be said that positive analysis involves the formulation and testing of hypotheses.

Hence option first is the correct answer.

2.

Since the price floor is the legal minimum price which can be charged and it is set above the equilibrium price. It leads surplus of outputs.

So when the price floor is set above the equilibrium price, only then it is effective but when it is set either below the equilibrium price or at the equilibrium price, then it will be ineffective. So there will be no unintended inventory and market gets cleared.

The price ceiling is a legal maximum price which can be charged by the sellers and it is set below the equilibrium price. The price ceiling imposed by the government leads shortage of goods.

If price ceiling is set below the equilibrium price, then it will be binding and if it is set above the equilibrium price, then it will be not binding.

Hence it can be said that because a price ceiling causes a shortage, some form of rationing must occur.

Hence option first is the correct answer.

3.

For a price ceiling to have an impact on a market, it must be set below the equilibrium price.

Hence option second is the correct answer.

4.

A binding price ceiling will cause quantity demanded to exceed quantity supplied.

Hence option fourth is the correct answer.