* . Imagine cold weather damages most of the European orange crop. At the same time, suppose consumer tastes shift toward orange juice. What would we expect to happen to the equilibrium price and quantity in the market for orange juice?

(a) Price will decrease; quantity is ambiguous.

(b) The impact on both price and quantity is ambiguous.

(c) Price will increase; quantity will increase.

(d) Price will increase; quantity will decrease.

(e) Price will increase; quantity is ambiguous.

* . If the statutory incidence of a commodity tax is on sellers, the economic incidence (or burden) of the tax is on: (show with a graph how you arrived at your answer)

(a) sellers, regardless of the elasticity of demand.

(b) buyers, regardless of the elasticity of demand.

(c) sellers if demand is perfectly inelastic.

(d) buyers if demand is perfectly inelastic.

*. Suppose you have been assigned to complete a group project with one of your classmates. Each of you can choose to Shirk or Work. If one or more of you chooses to Work, the project is completed and provides each with extra credit valued at 4 payoff units each. The cost of completing the project is that 6 total units of effort (measured in payoff units) divided equally among all players who choose to Work and this is subtracted from their payoff. If both of you Shirk, then neither of you have to expend any effort but the project is not completed, giving each a payoff of 0. The teacher can only tell whether the project is completed and not which students contributed to it. What is the dominant strategy for you?

(a) Work

(b) Shirk

(c) No dominant strategy

(d) Work if your friend also works

*. Describe the two principle properties of public goods.