Microeconomics

Assume that pens and pencils are substitutes. If the pencil manufacturers experience a decrease in the price of wood, which of the following will most likely occur?

• The demand curve for pencils will shift to the left.

• The supply curve for pens will shift to the right.

• The demand curve for pens will shift to the left.

• The supply curve for pencils will shift to the left.

A fourth-grade class just finished a lesson on taxation. The teacher wants to assess student understanding and instructs students to write down different services that the majority of taxes go towards in the United States. Some of the examples included:

"Entertainment"

"Education"

"Law enforcement"

"Roads"

Based on the student responses, the teacher should take steps to help clear up which of the following concepts?

• Entertainment is not a typical public service or necessity

• Police departments get funding through court fees and traffic tickets, not taxes.

• Roads are maintained by private companies contracted by private citizens.

• Public education is optional, so taxes do not go towards schools.

Which of the following is true for firms in monopolistic competition?

• They have complete control over the market
• They do not face any competition
• They have no market power
• Branding is an important means of product differentiation.

Two tropical nations, Costa Luna and St. Pierre, hire tour boat operators in a perfectly competitive labor market. If the demand for tour boat operators in Costa Luna falls, wages in Costa Luna are likely to:

• rise, and the supply of workers in St. Pierre would decrease.

• stay the same
• fluctuate
• fall, and the supply of workers in St. Pierre would increase.

In which of the following market structures do firms face low barriers to entry?

Select all answers that apply.

• 
  monopoly

• monopolistic competition

• oligopoly

• perfect competition

Which of the following best describes why the Great Recession was not limited to the United States but affected most industrialized nations?

• Lack of government intervention
• The United States borrowed from other economies during the housing crisis, sending those economies into recession.

• The International Monetary Fund downgraded the credit ratings of countries that had invested in the United States housing market, making it harder for them to borrow.

• Investors across the globe had purchased securities backed by the United States mortgage market.

Which of the following was an economic policy enacted by President Ronald Reagan during the 1980s?

• Supply-side economics
• tax cuts to encourage investment and consumer spending

• Monetary policy
• Fiscal policy

The American Recovery and Reinvestment Act of 2009 was intended to do which of the following?

• to help the US economy recover from the economic effects of the housing crisis and Great Recession

• Invest in infrastructure and improve public services
• Increase taxes on the wealthy and redistribute wealth
• Reduce government spending and decrease the national debt

Supply and demand curves can be used to illustrate which of the following?

Select all answers that apply.

• 
  changes in GDP

• producers' willingness to sell

• deadweight loss from taxation

• consumers' willingness to buy

In a free market, as price increases the quantity supplied will __________ while the quantity demanded will __________.

• increase; decrease

• remain the same; increase

• decrease; remain the same

• decrease; increase