Briefly explain what a product market is. Then, describe the role that product markets play in the flow of goods and services in an economy. In forming your response, be sure to describe the relationship between product markets, households, and businesses. Provide a brief example to illustrate this relationship. (4 points)

2. Briefly explain the law of supply. Then, describe how production cost and the presence of other sellers in the market influence the law of supply. Give a brief example of how each factor can influence supply. (4 points)

3. What is the difference between elastic and inelastic demand? Use your own perspective and experience as a consumer to give an example of each, being sure to clearly explain why you consider your demand for these goods to be elastic or inelastic. (4 points)

4. The monopoly is one of the basic types of market structures. What are its defining characteristics? Why would a seller want to start a monopoly, and why are monopolies generally considered harmful to an economy? (4 points)

5. Two of the four basic types of market structures are competitive: pure competition markets and monopolistic competition markets. Compare these two structures on the four criteria below, then give an example of each of the two structures:

• Number of buyers and sellers
• Similarity of products
• Sellers' control over price
• Ease of entering market

Write one analysis paragraph addressing the following prompt:

Imagine you want to start a business that designs and sells the finest submarines on the planet. Your dream is to ramp things up quickly, so before too long, you can sell your submarines to governments and private explorers all over the globe. And, of course, you can make a lot of money in the process. At this point, you've got the ideas and expertise but no money or resources. Which of the four business organizations will be best for your venture? Provide at least three reasons to support your choice.

(10 points)

7. Write one paragraph that explains how supply and demand contribute to the value of an equilibrium price. Then, analyze the following demand schedule, supply schedule, and chart of demand and supply curves, and respond to the following prompts:

1. In terms of supply and demand, would it be a good or bad business decision if Friendly Furniture sold its tables for $100? Why?
2. In terms of supply and demand, would it be a good or bad business decision if Friendly Furniture sold its tables for $500? Why?
3. What is the equilibrium price for a Friendly Furniture table? Explain what this means.