EC1301 Tutorial 1

1. In this exercise, we will estimate the opportunity cost of preening yourself for work
every morning. Take pictures of 5 products you use to beautify yourself every
morning.
a. How much do you spend (estimate) on these 5 products every month?
b. How much time do you spend preening yourself every month (estimate the time spent
per morning and then multiply by 30 or 31).
c. How would you calculate the opportunity cost of preening yourself per month?

2. Using what you learnt about scarcity and choice facing a society, evaluate this
statement critically: Higher immigrant worker levies will lead to higher costs for
companies and in turn to higher unemployment for natives in the long term.

3. Consider the following statements about costs. Are they correct? If not, provide a
correct statement about the relevant costs.
a. One year ago, I loaned $100 to a friend, and she paid me back the $100 in full. The
loan did not cost me anything.
b.

Suppose NUS builds a new football stadium on land that a wealthy alumni donated
to it. Since, NUS does not have to buy the land, the cost of the stadium equals the
$50 million paid out to construct it.

4. Suppose that a worker in Malaysia can make 20 cars or 100 bicycles per month, and a
worker in Singapore can make 30 cars or 200 bicycles per month.
a. Which country has an absolute advantage in cars? Which has an absolute advantage
in bicycles?
b.

Which country has a comparative advantage in cars? Which has a comparative

advantage in bicycles?

c.

If Singapore and Malaysia were to engage in trade, which country would export
which good?

5. How will each event likely affect production possibilities?

a. The population becomes more educated over time as the number of high school
dropouts falls and the number of university graduates rises.
b. The unemployment rate declines from 7.3 to 4.5 percent of the labor force.
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