Section 1. True/False/Uncertain Questions (4 Questions, 80 points) Q1. The COVID-19 outbreak and subsequent public health policy response have caused widespread disruption in most economies. Its effects across sectors in the economy have been extremely heterogeneous, with some industries shutting down almost completely (such as movie theaters), while others potentially benefiting from increased demand (such as general merchandise retailers). Hence, one can argue that the Covid-19 pandemic has caused both labour demand and supply shocks at the sectoral level. Given this situation, assess the following statement for a competitive firm operating in the long-run in a sector which has been affected by a negative supply shock to its labour market due to the Covid-19 pandemic: As result of the negative supply shock to its labour market, this competitive firm will use less of both workers and capital relative to the inputs of production levels before the Covid- pandemic. (20 points) Q2. Although the human capital (schooling) and signaling models have different underlying assumptions regarding the productivity enhancing role of education, they both predict a positive correlation between annual earnings and additional years of education. As a result, policy makers should encourage the governments around the world to subsidize university education through programs such as HECS and Fee-Help irrespective of the true extent of each model's role in the actual process of human capital investments. This is particularly relevant in situations like the current "after-Covid" Australian labour market with a record low unemployment rate and labour shortages in many sectors of the economy. (20 points) Q3. Lifestyle is a very important determinant of health, so it must be cost-effective to increase expenditure on public health campaigns aiming at improving individuals' lifestyle. (20 points) Q4. There is no room for increasing healthcare output without additional costs when hospitals are already technically efficient. (20 points)