One thing that distinguishes normative economic principles from positive economic principles is that:
A. normative principles tell us how people will behave, and positive principles tell us how people should behave.
B. normative principles are pessimistic and positive principles are optimistic.
C. normative principles tell us how people should behave, and positive principles tell us how people will behave.
D. normative principles reflect social norms, and positive principles reflect universal truths.
Answer: C
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Suppose a tax is imposed on baseball bats. In which of the following cases will the tax cause the equilibrium quantity of baseball bats to shrink by the smallest amount?
a. The response of buyers to a change in the price of baseball bats is strong, and the response of sellers to a change in the price of baseball bats is weak. b. The response of sellers to a change in the price of baseball bats is strong, and the response of buyers to a change in the price of baseball bats is weak. c. The response of buyers and sellers to a change in the price of baseball bats is strong. d. The response of buyers and sellers to a change in the price of baseball bats is weak.
The deadweight loss from a tax of $2 per unit will be smallest in a market with
a. inelastic supply and elastic demand. b. inelastic supply and inelastic demand. c. elastic supply and elastic demand. d. elastic supply and inelastic demand.