1. The law of demand states that people:

a. prefer high-quality goods to low-quality goods.

b. buy larger quantities of a good at lower prices.

c. prefer more to less.

d. are willing to pay a higher price only for goods they need.

5. Which of the following is likely to occur if the demand for housing increases?

a. The price of lumber used to build a house will fall.

b. The interest rate on mortgages needed to purchase a house will rise.

c. The demand for schools will rise.

d. The wages of carpenters who build houses will fall.

10. An excess demand for a product indicates that:

a. the price is below the equilibrium price.

b. there is a rightward shift in the demand curve.

c. there will be a downward movement along the supply curve.

d. the supply curve will shift rightward.

11. When the actual price in a market is above the equilibrium price we would expect:

a. this higher price to be the new equilibrium.

b. a shortage of the good or service.

c. a surplus of the good or service.

d. an excess demand or excess supply depending upon the extent of the difference between actual and equilibrium price.

17. The state of Florida enacted anti-gouging legislation that imposes criminal penalties on individuals or firms that charge more for their goods or services after a disaster, like a hurricane or tornado, than they charged just prior to the disaster. Each of the following represents the social loss of this legislation, except:

a. people would have to search longer to find available scarce resources like ice, plywood, and hotel rooms.

b. people would spend more time waiting in lines to acquire some of the scarce goods like ice, plywood, and hotel rooms.

c. more people who have alternatives to consuming the scarce goods like ice, plywood, and hotel rooms at the higher prices would now consume them.

d. fewer people will demand the scarce goods like ice, plywood, and hotel rooms which will reduce the producer surplus

18. Suppose a vaccine for the common cold is discovered. The government begins to produce the vaccine in as large a volume as possible. However, the market clearing price is very high due to high demand for it. Following this, the government introduces a price control and sets up an allocation scheme to control the vaccine's distribution. Which of the following is likely to be true about the price control introduced by the government?

a. The price set by the government is above the market equilibrium.

b. The price set by the government is below the market equilibrium.

c. The price set by the government is same as the market equilibrium.

d. Nothing can be determined about the price control from the information given here.

22. If the price elasticity of demand for a commodity is greater than one, it implies that:

a. an increase in supply will increase total revenues.

b. a decrease in supply will increase total revenues.

c. a price ceiling that lowers price below the market equilibrium will increase the total consumer spending on that good.

d. a price floor that raises price above the equilibrium will increase total the total consumer spending on that good.

23. Which one of the following is not a factor in the elasticity of demand for a good?

a. The length of time the price change is in effect

b. The substitutes available for the good or service

c. The percentage of one's budget the item consumes

d. The cost of producing the good or service