1 Which of the following needs to be fulfilled for markets to function properly? a) Property rights need to be clearly defined b) Prices need to be accurate economic signals c) Both a) and b) are true d) Neither a) nor b) is true

2 Which of the following is the example of a price ceiling? a) Minimum wage set by the government b) Quantity restrictions on how much to produce c) Minimum support price (minimum price guaranteed for crops) to farmers d) Capping (putting an upper limit on) prices of medical supplies during a pandemic

3 Assume that the company Netflix considers Hulu to be competition, but not close competition (or not a close substitute) in their market. If that is indeed the case, what should be true from the following when Netflix estimates the change in quantity demanded (in this case, the number of subscribers) of their own service when the subscription fees (price) of Hulu changes? a) Cross price elasticity of demand (Ecp) is positive but less than 1 b) Cross price elasticity of demand (Ecp) is positive and greater than 1 c) Cross price elasticity of demand (Ecp) is negative d) Income elasticity of demand (Ei) is positive

4 For products like sanitizers during a pandemic, consumers need them for protection, however, producers can easily produce them. As a result, what can we expect from the price elasticity of demand and supply in the market for sanitizers during a pandemic? a) Demand is elastic, but supply is inelastic b) Demand is inelastic and supply is inelastic c) Demand is elastic and supply is elastic d) Demand is inelastic, but supply is elastic

5 As we move down along a linear demand curve (a demand curve that is a straight line with a given negative slope) what happens to |Ed|? a) The price elasticity of demand increases b) The price elasticity of demand decreases c) The price elasticity of demand is always equal to 1 d) The price elasticity of demand is always less than 1

6 Assume that in the market for a life-saving drug which is generic (there are many competitors), one company buys a patent for the drug and creates a monopoly which reduces competition (there is now only one producer, reducing the number of alternatives). Which of the following can we say for sure? a) There will be an increase in total consumer surplus b) There will be a decrease in total producer surplus c) There will be an increase in total producer surplus d) There will be a decrease in total consumer surplus