【正文】 rice elastic. B) demand is perfectly price elastic. C) demand is more price elastic than supply. D) supply is price inelastic and demand is price elastic. E) none of the above. Ans: A5. In tight housing markets, rent controls are often applied to hold the price of housing to a reasonable level. What is the immediate effect of this price policy with respect to the allocative functions of prices, and the relative ines of tenants and landlords? A) The allocative function of prices is impaired, but the tenants are prevented from gaining at the expense of the landlords. B) The allocative function of prices is not impaired, and the tenants are prevented from gaining at the expense of landlords. C) The allocative function of prices is impaired, and the tenants who find housing gain at the expense of landlords. D) The allocative function of prices is not impaired, but the landlords gain at the expense of tenants who do not find housing. E) None of the above. Ans: C6. The price elasticity of supply shown in Figure 48 between points A and B is: A) .1. B) .5. C) 1. D) 5. E) none of the above. Ans: C7. Suppose that successive price reductions reduce total revenue. The supplier faces a demand curve that is, in this region: A) price elastic. B) unitary elastic. C) infinitely price elastic. D) indeterminate. E) price inelastic. Ans: E8. If its advocates are correct, the minimumwage bill passed by the House of Representatives would raise wages for nearly 7 million underpaid workers, but would have no noticeable effect on employment. The quotation implies that the demand for the labor services of the 7 million workers mentioned, with respect to the price of labor services, has elasticity equal to: A) 2. B) 5. C) 1. D) 0. E) .5 Ans: D9. A horizontal demand curve may be described as: A) relatively price elastic. B) perfectly price inelastic. C) relatively price inelastic. D) perfectly price elastic. E) unit elastic. Ans: D10. f a good is in fixed supply, then the incidence of a tax A) falls entirely on the consumers. B) falls mostly on the producers and partly on consumers. C) falls entirely on the producers. D) depends on the elasticity of demand. E) none of the above. Ans: C11. Refer to the Figure 413. What is the elasticity of the demand curve DD between points A and B? A) B) C) D) E) None of the above Ans: A12. Refer to Figure 413. What is the elasticity of the demand curve DD between points B and C? A) B) C) D) E) None of the above Ans: B13. Refer to Figure 413. What is the elasticity of the demand curve DD between points C and D? A) B) C) D) E) None of the above Ans: C14. If at a price of $8, quantity bought will be 3300 per day, and at $12, quantity bought will be 2700 per day, then the price elasticity of demand is approximately: A) B) C) D) E) Ans: B15. Given a relatively, but not perfectly, price elastic supply curve, an increase in demand will certainly: A) raise price but leave quantity sold unchanged. B) raise price and increase quantity sold. C) lower price, since supply cannot increase except through the inducement of higher price. D) reduce quantity sold but leave price unchanged. E) do none of the above, since increase in demand refers to a movement along a given demand curve. Ans: BCHAPTER 51. In the figure below, the drop in consumer surplus resulting from an increase in price from 5 to 10 is given by the area:A) FGH B) CEH C) FGDC D) CEGF E) DEG Ans: D2. A change in which of the following should not affect the demand for hot coffee? A) The price of coffee. B) The price of tea. C) Consumer ines. D) The weather. E) All the above affect the demand for coffee. Ans: A3. The paradox of value notes that: A) there is no rational explanation why people should set a high value on objects such as diamonds, which have little real usefulness. B) the price obtained from selling any modity may bear little relationship to the cost of producing it. C) supply and demand curves do very little to explain how value (or price) is determined. D) no one consumer has any control over the price (or value) of a modity, but consumers collectively do have such control. E) there is no consistent relationship between the total utility obtained from any modity and the price charged for it. Ans: E4. To be in equilibrium (., to maximize satisfaction), the consumer must: A) purchase no inferior goods. B) equalize the marginal utilities of the last unit purchased of every modity. C) be sure that the prices of all modities purchased are proportional to their total utilities. D) be sure that the price of each good is equal to the marginal utility of money. E) allocate ine so that the last penny spent on any good generates the same increment of utility as the last penny spent on any other good. Ans: E5. If I get 10 units of total utility (TU) from 2 oranges, 14 of TU from 3 oranges, and 17 of TU from 4 oranges, I obey the law of diminishing marginal utility because: A) MU falls as consumption increases. B) TU increases as consumption increases. C) TU MU. D) MU TU. E) MU = TU. Ans: A6. For a normal good, the substitution effect of a price increase: A) pushes the quantity demanded down along with the ine effect. B) pushes the quantity demanded down enough that the ine effect cannot push demand higher. C) pushes the quantity demanded up, but not enough to dominate an ine effect that ultimately pushes demand down. D) has an effect on the quantity demanded that is identical to the ine effect. E) pushes the quantity demanded up along with the ine effect.