b.33.c.21.75.d.26.e.30.50.ANS: A DIF: 229.In a crowded city far away, the civic authorities decided that rents were too high. The long-run supply function of two-room rental apartments was given byq145p, and the long-run demandfunction was given byq329−5p, wherepis the rental rate in crowns per week. The authorities madeit illegal to rent an apartment for more than 25 crowns per week. To avoid a housing shortage, theauthorities agreed to pay landlords enough of a subsidy to make supply equal to demand. How muchwould the weekly subsidy per apartment have to be to eliminate excess demand at the ceiling price?a.6.50 crownsb.10 crownsc.13 crownsd.26 crownse.19.50 crownsANS: C DIF: 130.In a crowded city far away, the civic authorities decided that rents were too high. The long-run supply function of two-room rental apartments was given byq52p, and the long-run demandfunction was given byq225−4p, where p is the rental rate in crowns per week. The authorities madeit illegal to rent an apartment for more than 30 crowns per week. To avoid a housing shortage, theauthorities agreed to pay landlords enough of a subsidy to make supply equal to demand. How muchwould the weekly subsidy per apartment have to be to eliminate excess demand at the ceiling price?a.10 crownsb.17 crownsc.20 crownsd.40 crownse.30 crownsANS: C DIF: 131.The price elasticity of demand for a certain agricultural product is constant (over therelevant range of prices) and equal to−1.50. The supply elasticity for this product is constant andequal to 4. Originally the equilibrium price of this good was $15 per unit. Then it was discovered thatconsumption of this product was unhealthy. The quantity that would be demanded at any price fell by11%. The percent change in the long-run equilibrium consumption of this good wasa.−11%.b.−8%.

c.−2%.d.−12%.e.There is not enough information to determine the answer.ANS: B32.The price elasticity of demand for a certain agricultural product is constant (over therelevant range of prices) and equal to−2. The supply elasticity for this product is constant and equal to3. Originally the equilibrium price of this good was $45 per unit. Then it was discovered thatconsumption of this product was unhealthy. The quantity that would be demanded at any price fell by100%. The percent change in the long-run equilibrium consumption of this good wasa.−100%.b.−64%.c.−20%.d.−60%.e.There is not enough information to determine the answer.ANS: D33.Suppose that King Kanuta, whom you met in your workbook, demands that each of hissubjects give him 1 coconut for every coconut that they consume. The king puts all of the coconutsthat he collects in a large pile and burns them. The supply of coconuts is given byS(ps)100ps, wherepsis the price received by suppliers. The demand for coconuts by the king’s subjects is given byD(pd)1,500−100pd, wherepdis the price paid by consumers. In equilibrium, the price received by supplierswill bea.$6.

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