a.

What is opportunity cost?

b.

You were planning to spend Thursday working at your part-time job, but a friend asks you to play cricket. What is the true cost of playing cricket? Now suppose that you had been planning to spend the day studying at the library. What is the cost of playing cricket in this case? Explain.

c.

Classify each of the following statements as positive or normative. Explain.

a. Society faces a short-term trade-off between inflation and unemployment.

b. A reduction in the rate of growth of money will reduce the rate of inflation.

c. The Reserve Bank should reduce the rate of growth of money.

d. Society ought to require people on social security benefits to look for jobs.

e. Lower tax rates encourage more work and more saving.

f. The government should raise the minimum wage.