Which of the following statements suggest a positive analysis and which a normative analysis? 3.1 Government...

Which of the following statements suggest a positive analysis and which a normative analysis?
3.1 Government subsidies to farmers are too high and should be phased out over the next decade.
3.2 If the tax on cigarettes is increased by 50 cents per pack, the equilibrium price of cigarettes will rise by 30 cents per pack.
3.3 If country A lifts the prohibition on imports of cigars produced in Country B, then price of cigars will fall.

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Expert Solution

3.1 Government subsidies to farmers are too high and should be phased out over the next decade : Suggests a normative analysis. This statement suggests normative analysis since there is a judgment that the government subsidies have increased and thereafter a suggestion that it should be phased out over the next decade.

3.2 If the tax on cigarettes is increased by 50 cents per pack, the equilibrium price of cigarettes will rise by 30 cents per pack : Suggests a positive analysis. This statement shows positive analysis since there are concrete facts as to the effect of the tax on cigarettes on the equilibrium price of the cigarettes.

3.3 If country A lifts the prohibition on imports of cigars produced in Country B, then price of cigars will fall : Suggests a normative analysis. The statement makes a judgment about the effect of the lifting of the prohibition on imports of cigars on the price on the cigars and does not show any testable conclusions as to the quantitative effect.

Rahul Sunny answered 1 year ago

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