ECO 1001-Review Question 1

Which of the following statements is an example of a normative statement?

• "Raising the minimum wage will lead to reduced hiring by firms."

• "The government should raise the minimum wage to reduce poverty."

• "Inflation is currently at 2%."

• "The unemployment rate has decreased by 1% over the past year."

What is opportunity cost?

• The cost of producing a good

• The value of the next best alternative that must be given up

• The price of a good

• The income of a consumer

What is the difference between positive statements (PS) and normative statements (NS)?

• PS are about "what is" and NS are about "what should be"

• PS are based on personal opinions and NS are based on data

• PS are always true and NS are always false

• There is no difference

What is the Production Possibilities Frontier (PPF)?

• A graph showing all the goods an economy can produce

• A graph showing the relationship between price and quantity supplied

• A graph showing the relationship between price and quantity demanded

• A graph showing combinations of two goods that an economy can produce

What does it mean if a point is on the PPF?

• Inefficient use of resources

• Not feasible with current resources

• Impossible due to lack of resources

• Efficient use of all resources

What is comparative advantage?

• The ability to produce more output with the same input

• The ability to produce a good at a lower opportunity cost

• The ability to produce a good faster than others

• The ability to produce a good without any cost

What is the law of demand?

• The quantity demanded of a good falls when the price of the good rises

• The quantity demanded of a good rises when the price of the good rises

• The quantity demanded of a good is always constant

• The quantity demanded of a good is unrelated to price

What is the law of supply?

• The quantity supplied of a good is always constant

• The quantity supplied of a good decreases when the price of the good rises

• The quantity supplied of a good increases when the price of the good rises

• The quantity supplied of a good is unrelated to price

What is consumer surplus?

• The amount a buyer is willing to pay minus the amount the buyer actually pays

• The cost of producing a good

• The amount a buyer actually pays minus the amount a buyer is willing to pay

• The price of a good

What is producer surplus?

• The cost of producing a good

• The amount a seller is paid for a good minus the seller's cost

• The amount a buyer is willing to pay for a good

• The price of a good