Question 1. Explain each of the following statement is true or false: a. a freeze in brazil’s coffee-growing region will lower the price of coffee. b. A rapid increase in college tuitions will lower the demand for college. c. The war against drugs with increased interdiction of imported cocaine will lower the price of domestically produced marijuana.

Question 2. For each of the following, explain whether quantity demanded changes as an effect of a demand shift or a price change, and then illustrate your answer using demandsupply diagrams: a. fish prices fall after the pope allows Catholics to eat meat on Friday. b. An increase in gasoline taxes lowers the consumption of gasoline. c. After the Black Death struck Europe in the fourteenth century, wages rose. Question 3. “Governments know how to create shortages and surpluses.” Explain the above statement using minimum wage or interest rate ceiling. Show graphically that if the demand for unskilled workers is price-elastic, a minimum wage will decrease the total earnings, i.e. wage multiply by quantity demanded of labor, of the unskilled workers. Question 4. 30% To deal with the increasing rent and hostility toward the landlords and developers, the governments impose rent controls. They set the limit on increase of the rent to a small annual basis and hence can control the rents even far below the market rents. a. Illustrate the impact of rent controls for apartments by demand-supply curves. b. What will be the effect of rent controls on the vacancy of the apartment? c. What non-rent options might arise as a substitute for the high rents? d.Explain the following critic, “Except for bombing, nothing is as efficient at destroying a city as rent controls.”