Question

6) Please use the following statements to answer this question: *

I. The process of testing and revising theories is central to the development of economics as a science. II. Theory is imperfect and may not adequately describe economic behavior in some cases.

A) I and II are true.

B) I is true and II is false.

C) I is false and II is true.

D) I and II are false.

7) The trade-offs facing consumers include: *

A) how to allocate income across goods and serves.

B) how to allocate income between consumption and savings.

C) both A and B

D) none of the above

8) Firms face trade-offs in production, including decisions related to: *

A) which products to produce.

B) how much of a particular product to produce.

C) the best way to produce a given amount of output

D) all of the above

9) During the presidential campaigns, the candidates from each party typically describe their plans to maintain or change federal taxes on personal and business income. Are these policy statements generally positive or normative? *

A) Positive

B) Normative

C) Both positive and normative

D) Neither positive or normative

10) Which of the following economic values is NOT an example of a price? *

A) Wage earned per hour

B) Annual interest rate paid for borrowed money

C) College tuition per semester

D) all are examples of prices

Answer 1

6. The correct option is A. Both I and II are correct. This is because the process of testing and revisiting theories is central to the development of economics as a science. Testing theories in a scientific way using the analytical tools suggests economics as a science.

Also, theories are imperfect and may not describe adequate behavious in some cases. This is because theories are formulated on the basis of certain assumptions. In real life, these assumptions does not exist and relationships become complex, thus invalidating the theory.

7. The correct option is C. Both A and B. This is because the consumer faces a trade off between allocation of income across goods and services and choosing between saving and consumption. This is because in these cases, the consumer has to choose between more of one and less of other and vice versa. This choice implies existence of trade off.

8. The correct answer is all of the above. This is because a firm faces a trade off in all the mentioned options. A firm has to face a trade off in picking a product to produce among various options. How much of a particular product to produce also involves trade off in the sense that the firm has to choose between maximizing profit or sales. Picking the best way to produce also involves a trade off because the firms has to choose between the technologies, plant sizes etc.

9. The correct answer is option B Normative. This is because it is the normative statements that focus on what should be or what ought to be statements aimed towards economic development, investment projects etc.

Positive statements in economics only focus on description and explanation.

10. The correct answer is D. All are examples of prices. This is because all the economic values describe the value of the given service or commodity which qualifies as price of that service or commodity.