ECON8069 - Tutorial 1, Week 2
1. True, False, or Uncertain: There is no reason to pay someone $20 to maintain your
bicycle, when you can do it yourself for free.
2. Many economic studies suggest that raising the tax on cigarettes reduces smok-
ing among low-income smokers. Evaluate the following statements as Positive or
Normative statements:
a) Increasing the cigarette tax is a method of reducing smoking.
b) If the government wants to reduce smoking, it can just raise cigarette taxes.
c) To reduce smoking, the government should raise cigarette taxes.
d) Increases in the cigarette tax are mostly paid by middle- and high-income
smokers.
e) Increasing cigarette taxes will make many low-income people worse off.
3. True, False, or Uncertain: Economic models are a poor guide to public policy
because they ignore many important aspects of the economy and human behaviour.
4. There is a proverb that states “anything worth doing, is worth doing well”. Would
most economists agree with this proverb?
5. Describe an instance of trade from your life in which no additional resources are
consumed, but nevertheless all individuals become better off.
By contrast, describe a trade from your life where the result of the trade is addi-
tional consumption by all individuals involved (or where there is the same level of
consumption, but less cost to produce those goods).