Question

QUESTION 42 What is true when average cost is falling? O Output is above the average cost level. Average cost is less than marginal cost. The marginal cost curve lies above the average cost curve. O Average cost is greater than marginal cost. QUESTION 43 Which of the following is a normative statement? The current minimum wage is $12. O Gasoline is currently priced at $3.50 a gallon. Five percent unemployment is too high. Our government pays 35% of health care costs.

Answer 1

Answer (42):

Average costs (AC) curve represents the total costs per unit of output. On the other hand, marginal costs (MC) curve shows the additional cost of producing one more unit of output. Both the curves are U-shaped i.e. they both first decline and then increase after attaining its respective minimun point with rise in output.

The relationship between AC curve and MC curve is shown below:

When MC < AC, AC falls. When MC = AC, AC is constant. When MC > AC, AC rises.

Thus, when average cost is falling, average cost is greater than marginal cost.

Answer (43):

In economics, normative statement represents a value judgement whether a situation is desirable or undesirable whereas a positive statement is an objective statementr based on facts which can be tested.

The statements that the current minimum wage is $12, gasoline is priced at $3.50 a gallon and government pays 35% of health care costs are all positive staements. These are based on some facts and figures an can be tested. These statements can be accepted or rejected after testing.

The statement that five percent unemployment is too high is a value judgement. It is based on someone's personal views and hence cannot be tested. 5% unemployment may be too high of someone or may be too low for someone. It cannot be proved as right or wrong. Hence, this is a normative statement.