1. Describe how the law of supply and demand works. Use at least one example in your answer.

(4 points)

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1. Define optimal efficiency. How is optimal efficiency achieved in production?

(4 points)

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1. Give one example of a fungible good and one example of a non-fungible good. What is the difference between these two types of goods, and why is it important?

(4 points)

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1. Define bargaining power. Explain the differences in bargaining power that employers have with union workers versus non-union workers.

(5 points)

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1. Explain why the housing market follows an up-and-down cycle.

(4 points)

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1. Why does relative scarcity determine the level of prices in a free-market system?