Explain the differences between positive economic analysis and normative economic analysis. Which of these approaches do economists generally adhere to and why?
What will be an ideal response?
Positive economic analysis is an objective analysis of "what is" in the economy. Normative economic analysis is a subjective analysis of "what should be" in the economy. Economists generally stick to positive economic analysis in an attempt to remain objective and avoid making judgments about fairness.
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The table above gives the production possibilities frontier for two countries, Anaconda and Bear. The opportunity cost of moving from production point B to production point C for Anaconda equals ________ and for Bear equals ________
A) 50 pairs of shoes; 100 pairs of shoes B) 100 pairs of shoes; 200 pairs of shoes C) 1 ton of corn; 1 ton of corn D) 550 pairs of shoes; 700 pairs of shoes E) 650 pairs of shoes; 900 pairs of shoes
What is the rationale behind a cap-and-trade emission allowance system?
A) It creates a market for externalities. B) It disciplines polluting firms by specifying the maximum amount of emissions allowed and gives them permits to pollute up to their allowance. C) It provides firms with the incentive to consider less costly alternatives to pollution reduction by making firms pay for the right to pollute beyond their specified allowance. D) It raises revenue for the government through the sale of permits.