17) The price elasticity of supply is 0.6. This means that A) a $10 increase in price would increase quantity supplied by 60. B) a 150 percent increase in price would increase quantity supplied by 90 percent. C) a 50 percent increase in quantity will occur when price increases by 30 percent. D) a 10 percent increase in quantity will occur when price increases by 6 percent. 18) The cross-price elasticity of demand of products "M" and "N" is zero. This implies that "M" and "N" are 19) If the price of apples went up by 25 percent, which of the following values of the cross price elasticity for cars would be most reasonable to anticipate? 20) Suppose a price ceiling is currently set below the equilibrium price. Now suppose that policy makers decide to lower the price ceiling. This reduction in the price ceiling will cause which of the following to occur?
5 21) A consumer is willing and able to buy 1,000 units of a good at $10, but the consumer's quantity demanded falls to zero if the price rises even a fraction of a cent. The consumer's demand curve is A) horizontal and is perfectly inelastic. B) horizontal and is perfectly elastic. C) vertical and is perfectly elastic. D) downward sloping from higher prices down to $10 and then horizontal. 22) Robert must always have cream in his coffee. For Robert, the cross price elasticity of demand for coffee and cream is 23) Use the above figure. When the price increases from $2 to $10, the absolute price elasticity of demand is
6 PART IIIQUESTION 24 Suppose that the government places a ceiling on the price of a medical drug below the equilibrium price. Show why there is a shortage of the medical drug at the new ceiling price. Please add a graph to your explanation. QUESTION 25 Suppose that a black market for the medical drug arises, with pharmaceutical firms secretly selling the drug at higher prices. Illustrate on a graph, the black market for this medical drug, including the implicit supply schedule, the ceiling price, the black-market supply and demand, and the highest feasible black market price.
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