CHAPTER 2 - Tools of Positive Analysis

1. Positive economics

a) does not depend on market interactions.

b) only looks at the best parts of the economy.

c) examines how the economy actually works (as opposed to how it should work).

d) is very subjective.

2. The Law of Demand states

a) that there is an inverse relationship between price and quantity demanded.

b) that the judicial branch of government sets demand schedules.

c) that laws can have no effect on market economies.

d) none of the above.

3. The function Y = f(X,Z) means

a) X multiplied by Y equals f.

b) X + Y = Z.

c) Y is a function of both X and Z.

d) none of the above.

4. If there is a function and one component is Y3, then there is a ____ in the function.

a) square root

b) cubic

c) cosine

d) circle

e) all of the above

5. Refer to Question 4 above. The equation containing Y3 would be

a) linear.

b) quadratic.

c) a Nash equilibrium.

d) inefficient.

e) nonlinear.

6. Marginal and average taxes are

a) calculated using the same methodology.

b) not used in modern tax analysis.

c) not calculated using the same methodology.

d) all of the above.