The Distinction Between Positive and Normative Economics

question 30

Multiple Choice

The distinction between positive and normative economics

• A) is that positive economics applies only to microeconomic problems.
• B) is that normative economics applies only to microeconomic problems.
• C) explains why economics is not a social science but a natural science.
• D) helps us to understand why economists sometimes disagree with one another.

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Definitions:

Pure Competition

A market structure characterized by many buyers and sellers, free entry and exit, and a homogeneous product, leading to price determination by supply and demand.

Price-taking Behavior

Describes individuals or companies that accept market prices as given because they have no power to influence those prices.

Pure Competition

A market structure characterized by many buyers and sellers, homogenous products, and no barriers to entry or exit, leading to efficient outcomes.

Market Model

A theoretical construct that describes the workings of a market through a set of mathematical equations or principles, aiming to predict the outcome of market forces.