D. People would continue to consume the same amount of the good.

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1 17. Because prices serve as incentives in a market economy, which of the following would be a likely result of a large increase in the price of a good? A. People would increase their consumption of the good. B. People would consume less of the good and look for substitutes. C. People would stop buying the good altogether. D. People would continue to consume the same amount of the good. 18. A college graduate has two job offers to consider. Company X has made an offer of 50 thousand dollars a year with the requirement to work 60 hours a week. On the other hand, company Y's offer is 40 thousand dollars a year and a 40 hour work-week. After deliberation, the graduate chooses to go join company Y because of the difference in the required hours on the job. What is this choice an example of? A. scarcity B. incentives C. opportunity cost D. decision making model 19. How would an increase in the number of people driving fuel-efficient cars affect the marketplace? A. The supply of gasoline would go down. B. The demand for gasoline would go down. C. The price for gasoline would go up. D. There would be shortages of gasoline. 20. Which of the following is another term for market clearing price? A. abundance B. price gouging C. scarcity D. equilibrium price

2 21. The supply and demand chart above shows that the supply is greater than the demand when a price floor is established. Which of the following is an example of a price floor? A. A city establishes rent controls in an attempt to have affordable housing. B. The government sets a minimum wage for all employees. C. A state tells the electric utilities what rates they can charge their customers. D. The government sets the price for a gallon of gasoline. 22. The price elasticity of demand refers to the fact that A. people are willing to buy the same amount of a good regardless of its price. B. the amount of a good people are willing to buy changes based on its price. C. people often buy less of a good when its price goes down. D. the amount of a good supplied is always equal to the amount demanded. 23. Which of the following describes the situation that occurs when the equilibrium quantity has been reached? A. One company has a monopoly. B. There is a surplus. C. Prices are very high.

3 D. There is no surplus or shortage. 24. A company holds a monopoly of selling shoes. What effect does the monopoly have on the customer? A. Supply decreases. B. The prices are higher. C. Supply increases. D. The prices are lower. 25. What is the result of the price ceiling in the scenario shown in the chart? A. There is a shortage of available goods. B. The demand for goods remains the same. C. The quantity demanded is equal to the quantity supplied. D. There is a surplus of available goods. 26.

4 Gregory's cell phone company offers two different text message plans. One plan would allow Gregory to send or receive 200 text messages a month. The other plan would allow him unlimited text messages a month, but it costs four times as much. Gregory chooses the cheaper plan because he does not think he will use many text messages. At the end of the month, Gregory finds that he has gone a few messages over his limit. Extra charges have been added for each extra message, and Gregory ends up paying more money than he would have if he had signed up for the unlimited plan. The phone company probably hopes that Gregory will respond by A. cancelling his service and finding a new phone company. B. telling his friends and family about what happened. C. reducing the number of text messages that he sends. D. signing up for the more expensive plan in the future. 27. For a single day, Hedgehog's Burgers is offering a free ice cream cone for anyone who comes to the restaurant. Television and radio commercials advertise the special offer weeks before the day arrives. In organizing this event, Hedgehog's Burgers probably hopes that A. the customers will expect free product offers in the future. B. only a few customers will ask for the free cones. C. only the restaurant's regular customers will learn about the offer. D. the customers will order something else as well. 28. A tropical storm has damaged citrus crops in the South. What is the likely effect of the storm on the cost of oranges? A. The demand for oranges will increase. B. The price of oranges will increase. C. The demand for oranges will decrease. D. The price of oranges will decrease. 29. The demand for gasoline increases during times when many people go on vacation. This happens in summer and on holidays like Memorial Day. What is the likely effect of this high demand on gasoline prices?

5 A. The price of gasoline will increase. B. The demand for gasoline will decrease. C. The price of gasoline will decrease. D. The supply of gasoline will increase. 30. Which of the following best defines the law of supply? A. As the price of a good falls, the amount of the good supplied rises. B. As the supply of a good increases, the price that consumers are willing to pay increases. C. As the price of a good rises, the amount of the good supplied rises. D. As the supply of a good increases, the price that consumers are willing to pay decreases. 31. In Japan, bluefin tuna is considered a delicacy. A single tuna can sell for as high as $600 or even $70,000. This illustrates how A. high prices cause demand to decrease. B. high demand causes prices to decrease. C. high demand causes prices to increase. D. high prices cause supply to increase. 32. Predict how the price of athletic shorts would change if schools banned their use. A. The price would stay the same. B. The price would fluctuate. C. The price would decrease. D. The price would increase. 33. Which best explains the law of demand? A. As the amount of a good increases, the price that consumers are willing to pay decreases. B. As the price of a good decreases, the amount that consumers are willing to purchase increases. C. As the price of a good decreases, the amount that consumers are willing to purchase decreases. D. As the amount of a good increases, the price that consumers are willing to pay increases. 34.

6 Which year most likely had the least expensive corn prices? A B C D Which statement most accurately explains the effect of competition among local gas stations on the price of gasoline? A. The price of gasoline will decrease. B. The supply of gasoline will increase. C. The price of gasoline will increase. D. The demand for gasoline will decrease. 36. What is the likely effect of competition among Internet service providers on the price of services? A. The price of services will increase. B. The demand for services will decrease. C. The price of services will decrease. D. The demand for services will increase. 37. A tropical storm has damaged citrus crops in the South. What is the likely effect of the storm on the cost of oranges?

7 A. The price of oranges will decrease. B. The price of oranges will increase. C. The demand for oranges will decrease. D. The demand for oranges will increase.