GE Chapter 01 solutions_fmt

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1、Chapter1

2、ThePrinciplesandPracticeofEconomics5Chapter1ThePrinciplesandPracticeofEconomicsQuestions1.Giveexamplestoexplainhoweconomicanalysiscanbepositiveandnormative.Answer:Positiveeconomicsisobjectiveandbasedonfacts.However,normativeeconomicsissubjectiveandopinionbased.Forexample:Po

3、sitive:Themismatchbetweenstudents’knowledgeandthemarketrequirementsisafactorunderlyinglowemployability.Normative:Thegovernmentshouldincreasetheminimumwageearnedbyeachemployee.2.Economicsstudiestheallocationofscarceresourcesforunlimitedwants.Explainthisstatementandidentifyhoweconomic

4、scanapplytoindividuals,firms,andnations.Answer:Individuals,firms,andnationsfacescarcity.Individualshavelimitedbudgets(scarceresources)comparedtotheirunlimitedwantsthattheywishtosatisfy.Firmshaveunlimitedinvestmentprojectsascomparedtotheirlimitedbudgets.Nationsmayhavemanyareas—growth

5、,humandevelopment,healthcare,legislature,educationetc.—thatrequireexpenditure,butduetolimitedbudgetsthegovernmentsneedtoprioritize.Scarcityofresourcesforindividuals,firms,andnationscomparedtotheirunlimitedwantspushesthemtomakechoicesbyallocatingscarceresourcestodesiredwants.Economic

6、sisasciencewhichhelpsinperformingthisallocation.3.Examinethefollowingstatementsanddetermineiftheyarenormativeorpositiveinnature.Explainyouranswer.a.TheU.S.automotiveindustryregistereditshighestgrowthratein5yearsin2012;U.S.autosalesincreasedby13%comparedto2011.b.TheU.S.governmentshou

7、ldincreasecarbontaxestocontrolemissionsthatcauseglobalwarming.Answer:a.ThisisanobjectivestatementabouttherateofgrowthintheU.S.automotiveindustry.Positiveeconomicsisanalysisthatgeneratesobjectivedescriptionsorpredictionsabouttheworldthatcanbeverifiedwithdata.Sincedatacanbeusedheretov

8、erifytherateofgrowthandwhetheritisthehighestinfiveyears,thisisapositivestatement.b.Thestatementthatthegovernmentshouldincreasecarbontaxestocontrolemissionsisnormativesinceitstateswhatthegovernmentoughttodo.Normativeeconomicsadvisesindividualsandsocietyontheirdecisionsandisalmostalwa

9、ysdependentonsubjec