List and describe the two areas of positive economics
What will be an ideal response?
Descriptive economics involves the compilation of data that describe economic phenomena and facts. Economic theory involves a statement or a set of related statements about cause and effect (action and reaction).
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For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $11 and a marginal cost of $10 . It follows that the
a. production of the 100th unit of output increases the firm's profit by $1. b. production of the 100th unit of output increases the firm's average total cost by $1. c. firm's profit-maximizing level of output is less than 100 units. d. production of the 101st unit of output must increase the firm's profit by more than $1.
Proponents of using the inflation tax to finance government budget deficits argue that:
A. these deficits would be far worse otherwise. B. the economic slowdown produced by the inflation tax is preferable to the hyperinflation that would occur in the absence of the inflation tax. C. while inflation is undesirable, the breakdown of the economy that would occur in the absence of an inflation tax would be worse. D. inflation is ultimately beneficial in the long run.
Insurance companies facilitate the transfer of risk from:
A. Those who have a low-risk tolerance to those with high risk-tolerance B. Those who have a high-risk tolerance to those with low risk-tolerance C. The insurance companies' owners to the insurance-policy holders D. Insurance policyholders to the bankers who lend money to the companies
A perfectly competitive firm that is maximizing profit produces the quantity of output at which price equals marginal cost.
Answer the following statement true (T) or false (F)