Question 1. If government makes it illegal for businesses to lower their prices, and there is a surplus of products and services in the market, explain how consumers and businesses will react.
Question 2. You own a flower shop and usually sell roses for $25 a dozen. In the month before Valentine's day, your supplier charge you a higher price for roses. A politician, who has many romantics in his riding, gets Parliament to pass a private member's bill making it illegal to charge more than $25 for a dozen roses. Other flower prices are not fixed. What will be your smart business choice for valentine's day?
Question 3. Explain the unintended consequences of rent controls for the choices of tenants and of landlords.
Question 4. Explain how a rise in the minimum wage affects job losses when the demand for labour is inelastic, and when the demand for labour is elastic.
Question 5. If you had to choose between a health-care system run by the market or run by government, which would you prefer? Explain the reasoning behind your choice. What changes in your life might make you change your choice?
Question 6. Do you think its correct to use economic profits as opposed to accounting profits when judging the success or failure of a business? Explain your reasons.
Question 7. What is the main difference between economic and accounting profits? What signal does it send to new businesses considering entering an industry when economic profits are negative? Zero? Positive?