1. Suppose a storm destroys 30 percent of the orange crop in the U.S. resulting in lower supply.
   1. Draw a supply and demand diagram to show what will happen to the equilibrium price and quantity of oranges in the United States. Assume the demand curve does not shift.
   2. Suppose the U.S. government observes that the price of oranges is increasing rapidly and imposes a price ceiling equal to the original equilibrium price. What effect does the price ceiling have on the quantity supplied and demanded of oranges? As a result of the price ceiling, how many oranges will actually be transacted?
   3. How is consumer and producer surplus affected by the price ceiling?
2. Suppose the price of woolen sweaters falls while the quantity of woolen sweaters sold increases. Assume there is no shift in the demand curve for woolen sweaters.
   1. Illustrate, using supply and demand curves, what will happen in the market for woolen sweaters. Label the new and old equilibrium points. Also label the old and new prices and quantities on the axes.
   2. What could have caused the change you just illustrated?
   3. Did consumers benefit from this change? Explain by using the sketch drawn in part (a)?
3. Consider the following supply and demand schedule:
   
   
   1. Draw the market supply and demand curves. Show the equilibrium quantity, price, producer surplus, and consumer surplus.
   2. Describe what would happen to the price of this product if a tax of $4.5 per unit sold is enacted by the government. Show your answer graphically.
   3. Show the deadweight loss due to the tax on your diagram.
4. Suppose there are three buyers (A, B, and C) in a competitive market with the marginal benefit (MB) schedules below. Calculate the consumer surplus using the market demand curve. Assume that the market price is $10. Show that you get the same answer by adding up the consumer surplus for all three buyers. How much does consumer surplus increase for the market as a whole and for each individual when the market price falls to $8?
5. Suppose there are three sellers (D, E, and F) in a competitive market with the marginal cost (MC) schedules below. Calculate the producer surplus using the market supply curve. Assume that the market price is $5. Show that you get the same answer by adding up the producer surplus for all three sellers. How much does producer surplus increase for the market as a whole and for each individual when the market price rises to $7
6. Suppose there are three buyers (Tom, Lily, and Sue) in a competitive market with the marginal benefit (MB) schedules below. If the price is $25, what will be the consumer surplus for each person? What is the consumer surplus for the market as a whole?
7. Suppose there are three sellers (Aaron, Jim, and Jill) in a competitive market with the marginal cost (MC) schedules below. If the price is $25, what will be the producer surplus for each person? What is the producer surplus for the market as a whole?
8. Suppose in a market, the government imposes a sales tax which causes the equilibrium price to go up. Draw a graph showing the original supply curve, the new supply curve, and the demand curve. Use this graph to show:
   1. The deadweight loss resulting from the tax.
   2. The amount of revenue collected by the government.
   3. The effect the tax has on producer and consumer surplus.
9. Explain why a sales tax on sailboats and a sales tax on beer will cause differing deadweight losses.
10. What would be the competitive equilibrium model predict about the quantity sold if people were not allowed to bid or ask for more than $5 for any good in the market described in problems 4 and 5? What if they were not allowed to bid or ask for less than $10? Illustrate your answers in a graph and show the deadweight loss in each case.