One thing that distinguishes normative economic principles from positive economic principles is that:
A. normative principles are pessimistic and positive principles are optimistic.
B. normative principles tell us how people should behave, and positive principles tell us how people will behave.
C. normative principles tell us how people will behave, and positive principles tell us how people should behave.
D. normative principles reflect social norms, and positive principles reflect universal truths.
Answer: B
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When neither player has a dominant strategy,
A) game theory will not provide information. B) no Nash-Equilibrium exists. C) at least one Nash-Equilibrium exists. D) the game cannot be analyzed.
An appropriate test of the effectiveness of an economic model is
A) the number of variables contained within the model. B) the model's ability to predict future economic activity. C) the number of economists who have worked on the model. D) the number of assumptions which the economist has made.
Public goods face the
A. law of overproduction. B. free-rider problem. C. principle of rival consumption. D. exclusion principle.
The figure below shows the foreign exchange market. D£ is the nonofficial demand curve for pounds. S£ (Spring-summer) and S£ (Autumn-winter) are the nonofficial supply curves of pounds during the spring-summer and autumn-winter seasons, respectively. Assume that the British government is committed to maintaining a fixed exchange rate at $1.90 per pound. In the Autumn-winter period, what type of intervention must British monetary authorities engage in?
A. Buy 20 billion pounds at $1.90 B. Sell 60 billion pounds at $1.60 C. Sell 20 billion pounds at $1.90 D. Buy 10 billion pounds at $1.60