1. Positive vs normative analysis. Which of the following statements indicate a
ID: 1133046 • Letter: 1
Question
1. Positive vs normative analysis. Which of the following statements indicate a positive (a) If the United States lifts the prohibition on imports of Cuban cigars, (b) A freeze in Florida will lead to an increase in the price of orange juice. e) To provide revenues for public schools, taxes on alcohol, tobacco, and (d) Telephone companies should be allowed to offer cable TV service as (e) If telephone companies are allowed to offer cable TV service, the price (f) Government subsidies to farmers are too high and should be phased analysis and which indicate a normative analysis? Explain your answer in each case. the price of cigars will fall. gambling casinos should be raised instead of increasing income taxes. well as telephone service. of both types of service will fall out over the next decade.Explanation / Answer
a) Positive analysis - This statement indicates what the consequences of the US action will be, ignoring any value judgment when making the claim.
b) Positive analysis –again this statement simply indicates the consequences of a change in an exogenous variable on the market, ignoring any value judgments.
c) Normative analysis –here the author implies that there are two possible solutions to providing additional revenues for public schools and suggests, based on a value judgment, which of the alternatives is better.
d) Normative analysis –again the author makes a claim based upon his own value judgment, namely that telephone companies offering cable TV service would be a good thing.
e) Positive analysis –The author is making a positive statement. The author is predicting the effect of a policy change on the price in a market.
f) Normative analysis –here the author is making a prescriptive statement about what should be done. This is a value judgment about the policy to subsidize farmers.
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