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Part one: In a perfectly competitive market in long-run equilibrium, what would be the immediate results of imposing and enforcing a price ceiling below the equilibrium price of the product? What would be the long-run effect of continuing to enforce the ceiling price assuming black markets don t develop? Be sure to explain why the predicted effects will occur.
Part two: A newspaper headline says, "The Coldest Winter in 20 Years Bring Record Prices for Heating Oil."
(a) Using a graph (include a graph directly in your answer or discuss your graph in answer) of home heating oil, show and explain how price changed.
(b) What other factors could cause the price of heating oil to increase?
Part three: Use the concept of opportunity cost to explain why both people and nations specialize and trade
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