1. Draw a diagram showing a price ceiling that is binding. On your diagram, clearly label the shortage that the price ceiling causes. Please provide a written explanation for this shortage. Also, shade-in the area which represents consumer surplus when the price ceiling is in place (please do not shade-in any other areas).

2. Consider a small country that exports good Z. Some of the total quantity of Z that is domestically produced is consumed by domestic consumers and the rest of it is exported. Then suppose that the government imposed a ban (a prohibition) on Z being exported. Show the effects of this export ban using a carefully labelled demand and supply diagram. On your diagram, shade-in the area that represent the dead-weight loss caused by the export ban (please do not shade-in any other areas) and explain your reasoning.

3. Consider an industry where there is perfect competition (with the conventional horizontal long-run market supply curve). Initially, all of the firms are making zero economic profit, then, the price of an important input falls so that firms all make positive economic profit in the short run, but in the long run economic profit returns to zero. Draw this using a two-panel diagram. Draw the representative firm panel on the left-hand-side and the market panel on the right-hand-side. Your diagram must be carefully drawn and properly labelled. Explain why, referring to your diagrams, in the long run profit returns to zero.

4. Consider a government-owned natural monopolist with a constant marginal cost (a horizontal marginal cost curve). This monopolist is instructed by the Government to set price equal to marginal cost. Construct a well-labeled diagram which shows that this monopolist will make an economic loss. Shade-in the area which represents the economic loss (please do not shade any other areas in). Please discuss the benefit and cost to society of the Government's marginal cost pricing policy.

5. Suppose that a drug that was illegal has been made legal. It is observed that the total expenditure on this drug falls with legalisation. While non-economists might explain this in terms of a change in consumer tastes, as economists we can explain this while sticking with the assumption that consumer tastes have not changed. Draw a demand and supply diagram showing the case where total expenditure clearly and unambiguously falls (with no shift in the demand curve) and provide a written explanation.

6. Draw a diagram where sellers have to pay a $X tax to the Government on each unit that they sell. Then this tax is decreased to $Y. Draw a demand and supply diagram showing this tax reduction causing an increase in Government taxation revenue. Please provide a written explanation for your diagram and discuss its policy implications.

7. Draw a diagram where sellers have to pay a $10 tax to the government on each unit that they sell. Draw your diagram so that (clearly, obviously and unambiguously) most of the burden of the tax falls on sellers. Clearly label the sellers' price and the buyers' price. Shade-in the area which represents the transfer of producer surplus to the government (please do not shade any other areas in). Please provide a clear explanation of your diagram.