1.A survey indicated that chocolate ice cream is America’s favorite ice-cream flavor. For each of the following, indicate the possible effects on the demand and/or supply, equilibrium price, and equilibrium quantity of chocolate ice cream.

2.In a supply and demand diagram, draw the change in demand for hamburgers in your hometown due to the following events. In each case show the effect on equilibrium price and quantity.

3.The market for many goods changes in predictable ways according to the time of year, in response to events such as holidays, vacation times, seasonal changes in production, and so on. Using supply and demand, explain the change in price in each of the following cases. Note that supply and demand may shift simultaneously.

4.Show in a diagram the effect on the demand curve, the supply curve, the equilibrium price, and the equilibrium quantity of each of the following events on the designated market.

5.Find the flaws in reasoning in the following statements, paying particular attention to the distinction between changes in and movements along the supply and demand curves. Draw a diagram to illustrate what actually happens in each situation.

6.In Rolling Stone magazine, several fans and rock stars, including Pearl Jam, were bemoaning the high price of concert tickets. One superstar argued, “It just isn’t worth $75 to see me play. No one should have to pay that much to go to a concert.” Assume this star sold out arenas around the country at an average ticket price of $75.

7.After several years of decline, the market for handmade acoustic guitars is making a comeback. These guitars, which are normal goods, are usually made in small workshops employing relatively few highly skilled luthiers. Assess the impact on the equilibrium price and quantity of handmade acoustic guitars as a result of each of the following events. In your answers, indicate which curve(s) shift(s) and in which direction.

8.Will Shakespeare is a struggling playwright in sixteenth-century London. As the price he receives for writing a play increases, he is willing to write more plays. For the following situations, use a diagram to illustrate how each event affects the equilibrium price and quantity in the market for Shakespeare’s plays.

9.The small town of Middling experiences a sudden doubling of the birth rate. After three years, the birth rate returns to normal. Use a diagram to illustrate the effect of these events on the following:

10.Use a diagram to illustrate how each of the following events affects the equilibrium price and quantity of pizza.

11.Although he was a prolific artist, Pablo Picasso painted only 1,000 canvases during his “Blue Period.” Picasso is now dead, and all of his Blue Period works are currently on display in museums and private galleries throughout Europe and the United States.

12.Suppose it is decided that rent control in New York City will be abolished and that market rents will now prevail. Assume that all rental units are identical and are therefore offered at the same rent. To address the plight of residents who may be unable to pay the market rent, an income supplement will be paid to all low-income households equal to the difference between the old controlled rent and the new market rent.

13.In the late eighteenth century, the price of bread in New York City was controlled, set at a predetermined price above the market price.

14.Suppose the U.S. government decides that the incomes of dairy farmers should be maintained at a level that allows the traditional family dairy farm to survive. It therefore implements a price fl oor of $1 per pint by buying surplus milk until the market price is $1 per pint. Use the accompanying diagram to answer the following questions.

15.European governments tend to make greater use of price controls than the U.S. government. For example, the French government sets minimum starting yearly wages for new hires who have completed le bac, certifi cation roughly equivalent to a high school diploma. The demand schedule for new hires with le bac and the supply schedule for similarly credentialed new job seekers are given in the accompanying table. The price here—given in euros, the currency used in France—is the same as the yearly wage.

16.Until recently, the standard number of hours worked per week for a full-time job in France was 39 hours, similar to that in the United States. But in response to social unrest over high levels of involuntary unemployment, the French government instituted a 35-hour workweek—a worker could not work more than 35 hours per week even if both the worker and employer wanted it. The motivation behind this policy was that if current employees worked fewer hours, employers would be forced to hire more new workers. Assume that it is costly for employers to train new workers. French employers were greatly opposed to this policy and threatened to move their operations to neighboring countries that did not have such employment restrictions. Can you explain their attitude? Give an example of both an ineffi ciency and an illegal activity that are likely to arise from this policy.

17.For the last 70 years, the U.S. government has used price supports to provide income assistance to U.S. farmers. At times the government has used price fl oors, which it maintains by buying up the surplus farm products. At other times, it has used target prices, giving the farmer an amount equal to the difference between the market price and the target price for each unit sold. Use the accompanying diagram to answer the following questions.

18.The waters off the north Atlantic coast were once teeming with fi sh. Now, due to overfi shing by the commercial fi shing industry, the stocks of fi sh are seriously depleted. In 1991, the National Marine Fishery Service of the U.S. government implemented a quota to allow fi sh stocks to recover. The quota limited the amount of swordfi sh caught per year by all U.S.-licensed fi shing boats to 7 million pounds. As soon as the U.S. fi shing fl eet had met the quota, the swordfi sh catch was closed down for the rest of the year. The accompanying table gives the hypothetical demand and supply schedules for swordfi sh caught in the United States per year.

19.The accompanying table indicates the U.S. domestic demand schedule and domestic supply schedule for commercial jet airplanes. Suppose that the world price of a commercial jet airplane is $100 million.

20.The accompanying table shows the U.S. domestic demand schedule and domestic supply schedule for oranges. Suppose that the world price of oranges is $0.30 per orange.

21.The U.S. domestic demand schedule and domestic supply schedule for oranges was given in Problem 20. Suppose that the world price of oranges is $0.30. The United States introduces an import quota of 3,000 oranges and assigns the quota rents to foreign orange exporters.

22.As the United States has opened up to trade, it has lost many of its low-skill manufacturing jobs, but it has gained jobs in high-skill industries, such as the software industry. Explain whether the United States as a whole has been made better off by trade.

www.worthpublishers.com/krugmanwells