Download KEY TO QUIZ #2

Econ. 102: Introductory Microeconomics
Mr. Killingsworth
Quiz #2: VERSION A
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Use a pencil or blue or black ink to fill in your answers.
Fill in the “bubbles” AND fill in your student ID number in the space provided.
Fill in the “bubbles” to identify the version of your Test Form: this is VERSION A.
If you make a mistake, erase the wrong answer completely and fill in the correct answer. If you
are using ink, put an “X” through any wrong answer and fill in the right answer.
This quiz has a total of FIFTEEN questions.
KEY TO QUIZ #2
(correct answers in underlined BOLDFACE type)
1. A price ceiling…
A.
B.
C.
D.
E.
gives suppliers and demanders an incentive to engage in illegal activities
reduces the amount of output produced (relative to a situation without a price ceiling)
results in a less efficient outcome (relative to a situation without a price ceiling)
all of the above
none of the above
2. Vijay buys the latest iPhone for $900. He would have been willing to pay as much as $1,100
for it. Consumers surplus for Vijay is therefore
A.
B.
C.
D.
E.
$100
$200
$900
$1100
none of the above
3. Assume that legalizing marijuana would increase the supply curve of marijuana, but would not
affect the demand curve for marijuana. Advocates of legalizing marijuana argue that this would
significantly reduce the revenue received by sellers of marijuana. These advocates must, therefore,
believe that…
A.
B.
C.
D.
E.
supply of marijuana is price-elastic
supply of marijuana is price-inelastic
demand for marijuana is price-elastic
demand for marijuana is price-inelastic
none of the above
4. Which of the following is likely to be a result, in the long run, of a binding rent control law?
A.
B.
C.
D.
E.
Some producer surplus will now be received by consumers instead.
The quantity of apartments supplied in the market will rise.
The quantity of apartments demanded in the market will fall.
Producer's surplus will rise.
None of the above (i.e., none of the above things are likely to occur in the long run as a result of
rent control)
5. If a market is "efficient," then, taking the supply and demand curves in the market as given,
A.
B.
C.
D.
E.
consumer's surplus is maximized
producer's surplus is maximized
consumer's surplus is maximized, and producer's surplus is maximized
the total of consumer's plus producer's surplus ("total surplus") is maximized
none of the above
6. A binding price ceiling causes
A.
B.
C.
D.
E.
a shortage which cannot be eliminated by market adjustment
a surplus which cannot be eliminated by market adjustment
a shortage which will be temporary, since market adjustment will cause price to rise
a surplus which will be temporary, since market adjustment will cause price to fall
none of the above
7. When the government imposes a price ceiling or a price floor in a market,
A.
B.
C.
D.
E.
price no longer serves as a rationing device
efficiency in the market is increased
shortages and surpluses are eliminated
buyers and sellers are both better off
none of the above
8. When suppliers (but not demanders) determine the quantity of a good bought and sold in a
market, then this must be because
A.
B.
C.
D.
E.
the market is in equilibrium
there is a binding price floor in effect
there is a binding price ceiling in effect
both A and B are correct
none of the above
9. Good weather results in a wheat harvest that is much larger than usual. Under what conditions
would wheat farmers experience an increase in revenue?
A.
B.
C.
D.
E.
If the supply of wheat is elastic
If the supply of wheat is inelastic
If the demand for wheat is inelastic
If the demand for wheat is elastic
none of the above
10. ABC Co.'s supply curve is step-shaped: it would be willing to sell the first unit of output it
produces for as little as $1; it would be willing to sell the second unit of output for as little as $2; it would
be willing to sell the third unit of output for as little as $3; and so on. If the market price of output is
$2.50 per unit, and ABC Co. is selling all output that it wants to sell at this price, what is ABC Co.'s
producer surplus?
A.
B.
C.
D.
E.
$0.50
$1
$2
$2.50
none of the above
11. Which of the following statements is true?
A.
B.
C.
D.
E.
An effective price ceiling reduces the quantity of the good that consumers buy, whereas an
effective price floor increases the quantity of the good that consumers buy.
An effective price ceiling reduces the quantity of the good that consumers buy, and an
effective price floor reduces the quantity of the good that consumers buy.
An effective price ceiling increases the quantity of the good that consumers buy, and an effective
price floor increases the quantity of the good that consumers buy.
An effective price ceiling increases the quantity of the good that consumers buy, whereas an
effective price floor reduces the quantity of the good that consumers buy.
None of the above.
Questions 12-15 all refer to the following regression analysis results:
A regression analysis of families' purchases of Coca-Cola has produced the following results:
Qc = 10.00 – 0.21 Pc + 0.17 I + 0.41 Pp + 0.12 Pz + 0.52 T + 1.04 F – 0.21 A
(0.12) (0.05)
(0.01)
(0.17)
(0.09)
(0.22)
(0.39)
(0.04)
where Qc = quantity of Coca-Cola purchased per household, in six-packs per month; Pc = price of CocaCola; I = family income; Pp = price of Pepsi; Pz = price of pizza; T = temperature (degrees Fahrenheit);
F = total number of family members (adults plus children); and A = number of adults in family. Standard
errors of the coefficients appear in parentheses.
12. The sign (plus or minus) of which coefficient is contrary to what one might expect?
A.
B.
C.
D.
E.
the coefficient on Pc
the coefficient on I
the coefficient on Pp
the coefficient on Pz
none of the above (the sign of each coefficient is what one would expect)
13. Consider the coefficient for Pc and its standard error. What do these two pieces of
information tell us about the demand for Coca-Cola?
A.
B.
C.
D.
E.
Coca-Cola is a normal good, and the relation between demand for Coca-Cola and income is
statistically significant.
The demand curve for Coca-Cola is downward-sloping, and the relation between demand
for Coca-Cola and the price of Coca-Cola is statistically significant.
Coca-Cola and Pepsi-Cola are substitutes, but this relation is not statistically significant.
Ceteris paribus, families with more children consume more Coca-Cola, and this relation is
statistically significant.
none of the above
14. According to these results, ceteris paribus, how much more or less Coca-Cola will a family of
two adults and one child consume, relative to a family of two adults and no children?
A.
B.
C.
D.
E.
0.21 less six-packs per month
0.83 more six-packs per month
1.04 more six-packs per month
1.25 more six-packs per month
none of the above
15. Consider the coefficient for I and its standard error. What do these two pieces of information
tell us about the demand for Coca-Cola?
A.
B.
C.
D.
E.
Coca-Cola is a normal good, and the relation between demand for Coca-Cola and income is
statistically significant.
The demand curve for Coca-Cola is downward-sloping, and the relation between demand for
Coca-Cola and the price of Coca-Cola is statistically significant.
Coca-Cola and Pepsi-Cola are substitutes, but this relation is not statistically significant.
Ceteris paribus, families with more children consume more Coca-Cola, and this relation is
statistically significant.
none of the above