1. In February 2013 Argentina announced a 2 month freeze on supermarket prices in an attempt to fight double digit inflation. This is essentially a price ceiling for supermarket products at their current price levels.

Do you see any problem with this strategy? Include a demand & supply sketch in your answer.

2. Why should you care about the elasticity of demand and elasticity of supply for a good you are considering taxing? Include a demand and supply sketch in your explanation.

3. Do you consider police department services a public good (or near public good)? Why or why not?

4. Avocados have been found to be high in nutrients that help in fighting diseases such as prostate cancer, oral cancer, and breast cancer, eye diseases, heart disease, and stroke. Suppose the Avocado Growers Association of California argues that since avocados clearly provide significant positive externalities your government agency should provide subsidies for avocados. Please respond to their argument for funds from your budget.

5. What is a shadow price? Why might you use a shadow price? Please include an example.

6. What's the difference between a social insurance program and an income redistribution program? Please give an example of each and explain how the justifications differ.