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the wage freeze an example of a price floor or a price ceiling? Use the
model of demand and supply to explain why employers began to offer
such benefits to their employees.
4. The text argues that political instability in potential suppliers of oil
such as Iraq and Venezuela accounts for a relatively steep supply
curve for crude oil such as the one shown in Figure 4.2 "The Increasing
Demand for Crude Oil" Suppose that this instability eases considerably
and that the world supply curve for crude oil becomes much flatter.
Draw such a curve, and explain its implications for the world economy
and for typical consumers.
5. Suppose that technological change affects the dairy industry in the
same way it has affected the computer industry. However, suppose
that dairy price supports remain in place. How would this affect
government spending on the dairy program? Use the model of
demand and supply to support your answer.
6. People often argue that there is a “shortage” of child care. Using the
model of demand and supply, evaluate whether this argument is likely
to be correct.
7. “During most of the past 50 years the United States has had a surplus
of farmers, and this has been the root of the farm problem.”
Comment.
8. Suppose the Department of Agriculture ordered all farmers to reduce
the acreage they plant by 10%. Would you expect a 10% reduction in
food production? Why or why not?
9. The text argues that the increase in gasoline prices had a particularly
strong impact on low-income people. Name some other goods and
services for which a sharp increase in price would have a similar
impact on people with low incomes.

Attributed to Libby Rittenberg and Timothy Tregarthen
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