Normative Economics Is an Approach to Economics That

question 6

Multiple Choice

Normative economics is an approach to economics that

• A) seeks to understand behavior and the operation of systems without making judgments.
• B) analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe preferred courses of action.
• C) applies statistical techniques and data to economic problems.
• D) examines the role of government in the economy.

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Definitions:

Variable Costing

An accounting method that only includes variable manufacturing costs (direct materials, direct labor, and variable manufacturing overhead) in product costs.

Finished Goods Inventory

Items in stock that are completed and ready for sale, representing one of the stages in the production inventory.

Variable Costing

A costing method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs, excluding fixed manufacturing overhead from product cost calculations.

Net Operating Income

The income generated from normal business operations after deducting operating expenses such as wages and cost of goods sold, excluding income from investments and other non-operational sources.