Introduction to Microeconomics Test 12

The budget line shows different combinations of two commodities which the consumer can buy given the prices of both the commodities and the budget of the consumer. So if the consumer wants to increase the consumption of one commodity, it has to decrease the consumption of the other. This results inverse relationship between both the variables, which is denoted by a downward sloping budget line from left to right.

The slope of production possibility curve is marginal opportunity cost which refers to the additional sacrifice that a firm makes when they shift resources and technology from production of one commodity to the other. Therefore, if marginal opportunity cost remains constant then PPC will be a straight line owing to constant slope.

The budget line is the graphical representations of all possible combinations of two goods which can be purchased with given income and prices such that the cost of each of these combinations is equal to the money income of the consumer.  Budget line is therefore called the price line, price opportunity line and consumption possibility curve as well. 

An increase in the number professionally qualified persons, the production possibility frontier will shift outward. Where there is advancement of technology or increase in availability of resources or introduction of a production method with improved efficiency in respect to both the goods, then PPF will shift to the right, i.e. outwards. This is because the more of both are goods are being produced due to the above factors.

'A government deficit will reduce unemployment and an increase in prices.' This statement is positive.
Positive statements study the facts of life i.e. it deals with 'things as they are'. It deals with what are the economic problems and how are they actually solved. It explains the cause and effect relationship and avoids giving suggestions. Since the statement is not giving any suggestions. Thus it is a positive statement. 

When boom period is going on in the economy, the macro level economic growth is reflected positively in the micro variables of the economy, due to which all the inter-related sectors enjoy the benefits. Therefore, it showcases the relation between micro and macro economics.

When consumer is fully satisfied by a commodity it is the point of maximum satisfaction after which any further consumption of the commodity will lead to negative marginal utility. Therefore, when the consumer is fully satisfied he gains zero marginal utility on consumption of one more unit. 

The production possibility frontier will shift outward when there is and increase in the productive resources. Where there is advancement of technology or increase in availability of resources or introduction of a production method with improved efficiency in respect to both the goods, then PPF will shift to the right, i.e. outwards. This is because the more of both are goods are being produced due to the above factors.

Statement C is incorrect. Normative statements are concerned with the welfare propositions. Normative economics deals with what ought to be or how the economic problems should be solved. It discusses what the desirable things are and how they should be realized. Thus it is suggestive in nature as it prescribes solutions to problems. 

The statements of both Ram and Shyam shows the positive aspect of economics and are therefore Positive statements.
Positive statements study the facts of life i.e. it deals with 'things as they are'. It deals with what are the economic problems and how are they actually solved. It explains the cause and effect relationship and avoids giving suggestions.