The economic analysis of minimum wage involves both normative and positive analysis. Consider the following consequences of a minimum wage:
a. The minimum wage law causes unemployment.
b. Unemployment would be lower without a minimum wage law.
c. Minimum wage laws benefit some workers and harm others.
d. The minimum wage should be more than $7.25 per hour.
Which of the consequences above are positive statements and which are normative statements?
A) a, b, and c are positive statements and d is a normative statement.
B) a and b are positive statements, c and d are normative statement.
C) Only a is a positive statement, b, c, and d are normative statements.
D) a and c are positive statements, b and d are normative statements.
Answer: A
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Lane and Riley are the only two residents in a neighborhood, and they share the same driveway. They would like to have the driveway paved. The value of the paved driveway is $1,500 to Lane and $900 to Riley. Regardless of who pays for the paving both people will benefit from it. What is the most a contractor can charge to pave the driveway and still be assured of being hired by at least one of them?
A. $1,500 B. $600 C. $900 D. $2,400
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A. The economy has reached the lowest level of unemployment compatible with price stability. B. Frictional unemployment has been reduced to zero. C. The total unemployment rate has been reduced to zero. D. Structural unemployment has reached its minimum as a result of increased spending, and the economy is moving toward the peak of the business cycle.