Question

15

Suppose a protestor who never took an economic or business class and who never studied the facts about world trade made a sign that said, “All U.S. multi-national corporations are greedy pigs who exploit the poor.”

Conclusion: This statement is going to be classified as a normative economic statement.

True or False

17

A research economist found that the price of XYZ stock closely correlated with the daily movements of the U.S. stock market. The simple correlation = .90 and they calculated that the​ R2 factor = .81 (.90 x .90). What does this mean?

Multiple Choice

• We can’t conclude anything from this limited information.    

• In economics this represents a strong relationship between two factors. However, it does not claim any cause and effect relationship. Further investigation must be made into the cause and effect relationship.

• These numbers verify a strong cause and effect relationship.

• You can bet your life that this relationship will last for several decades.

19

Collusion is beneficial to society because when suppliers eliminate flexible prices to create one fixed price, then this will help make the marketplace more efficient.     

True or False

34

If a newly elected President of the U.S. and Congress planned to pass a new “super-profits business tax” of 90 percent on all profits earned by U.S. corporations, then what would happen next?

Conclusion: Logically, many of these firms will try to pass this new cost on to their customers in the form of higher prices and/or relocate outside of the U.S. to escape this high tax. This new tax will probably create more unemployment and poverty.         

True or False

Answer 1

15.

Normative statement

This is because the statement represents the personal opinion of the protestor

17.

In economics this represents a strong relationship between two factors. However, it does not claim any cause and effect relationship. Further investigation must be made into the cause and effect relationship

Reason: This is because of high value of R

19.

False

Reason: Collusion often leads to encouragement of monopoly powers on the market and firms charge high prices, thereby reducing consumer surplus

34.

True

Reason: The given statement is correct