1. Identify the underlying author or economical/philosophical/political basis for the following ideas (statements) to distribute goods for the benefit society:
a) The free market outcome should not be tampered with.
b) Prices signal to goods and resources exactly where they are most valued.
c) From each according to his ability to each according to his need
d) Goods need to be distributed so that society’s total happiness is maximized- even if it requires taking some from the wealthiest to give to the poorest.
e) The marvel is that in a case like that of the scarcity of one raw material, without an order being issued, without more than perhaps a handful of people knowing the course, tens of thousands of people . . . .are made to use the material or its products more sparingly; i.e. they move in the right direction.

2. Illustrate a market with labeling that identifies the equilibrium price in the market as the value of a good in the next highest use, or opportunity cost.

3. What is the process of speculation? Provide an example of speculation that relates to your definition or description of the process of speculation.

4. If Hershey Chocolate Co. is to hedge against the movement up and down of cocoa beans (the basic ingredient for manufacturing chocolate), when should they buy and when should they sell cocoa bean futures? Explain using your understanding of speculation and futures contract price behavior.

5. Use a graph with appropriate labeling to point out theseveral componentsof thelost gains of trade associated with a price control policy which imposes a price ceiling. Then provide a brief description of the impacts of the lost gains of trade associated with such a policy.

6. Are there differences in the distortions to economic welfare upon the imposition of rent controls by government bodies? Explain, or graph(with labels) and explain, your answer.

7. Define graphically, with explanation and/or labeling, the distortions and losses of a price floor policy?

8. If there is an opportunity to export a product that is under a price floor policy are any of the distortions created by such a policy modified or even eliminated? Explain.

9. What is protectionism? Explain.

10. What are the costs of Protectionism? Explain or graph and explain.

11. Below you will find two graphs with labeling. Indicate which graph reflects the opportunity to increase economic welfare by importing and which graph reflects the opportunity to increase economic welfare by exporting. Then indicate the gains and losses in each case either by explanation or illustrating the areas of gains and losses in the graphs.

Price Supply
World price
Demand

Quantity
Price Supply
World price
Demand

Quantity