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Econ. 102: Introductory Microeconomics Mr. Killingsworth Quiz #2: VERSION A 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