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Economic Theory and Starting Points

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Questions and Answers

What is the difference between positive and normative?

Positive statements are abstract explanations, while normative statements are explanations of phenomena

Positive statements are based on opinions, while normative statements are based on facts

Positive statements are based on opinions, while normative statements are based on theories

Positive statements are based on facts, while normative statements are based on opinions (correct)

In the context of the text, what is the significance of scarcity?

It highlights the rational choices made by individuals

It explains the unlimited desires of humans

It demonstrates the methodological individualism in social science

It emphasizes the insufficiency of goods to meet human desires (correct)

What does the price system involve?

Promoting a zero-sum game in trade and exchange

Setting a just price for every good in a society

Placing monetary value on human life in society

Creating a network of interrelated prices for goods and services (correct)

In the context of the text, what is the distinction between nominal and real value of money?

Nominal value represents a certain amount of money, while real value reflects the goods and services it can purchase Signup and view all the answers

What is the Invisible hand?

The power of individual self-interest to create spontaneous self-order Signup and view all the answers

What does the Labor Theory of Value propose?

Price of good is based on cost of production - cost labor used to produce it Signup and view all the answers

What is the theory of Marginal Utility?

The additional utility that a person gets from having one more unit of a good or loses from having one unit less of a good Signup and view all the answers

What is the Iron Law of Wages?

Price of labor is determined by the cost of human subsistence and reproduction Signup and view all the answers

What does the Theory of Derived Demand propose?

Range of indeterminancy = the range of potential prices buyers' maximum buying price, and sellers' minimum selling price Signup and view all the answers