Question 1: Topic--Price Controls, Chapter 4--Graph Required

A. Draw a graph of the market for low-skilled labor services with an equilibrium wage of $12 and an equilibrium quantity of 100.

Explain who (employers or workers) demands labor services and who (employers or workers) supplies labor services.

Show on your graph the area that represents total gains from trade in this market.

B. Now assume that a price floor of $15 is imposed on this market. Show on your graph and explain the following.

How does the price floor impact the quantity supplied and the quantity demanded of labor services.

Show on your graph the amount of unemployment created by the price floor.

Show the Deadweight Loss created by by the price floor and explain why the Deadweight Loss exists and what it represents.

C. Focusing on the labor market, discuss how the price floor impacts the poor workers. Are all poor workers made better off by the minimum wage? Do you think that the incidence of poverty increases or decreases due to the minimum wage?

Question 2: Topic: Government Failure, Chapter 6

A. Define Government Failure

B. Explain how each of the following lead to Government Failure

Rational Ignorance of Voters

The Special Interest Effect

The Shortsightedness Effect

Rent-Seeking Behavior

Crony Capitalism

Question 3: Topic: GDP, Chapter 7

Discuss the strengths and problems with GDP as a measure of a country's current production and income.