Explain what is meant by “derived demand” as it relates to factors of production.
What will be an ideal response?
The demand for a factor of production is derived from the underlying demand for the final good or service that the factor produces. A firm does not wish to employ, and pay for, the factor for itself; the firm wishes to employ the factor for what the factor will add to the profitability of the firm. Therefore, an increase in the price of the final good or service, which will increase the profitability of production, will also lead to an increase in demand for the factor.
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When the government chooses to use resources to build a dam, these sources are no longer available to build a highway. This choice illustrates the concept of
A) a market mechanism. B) macroeconomics. C) opportunity cost. D) a fallacy of composition.
Who was the effectively in charge of the Fed during the early 1930s?
A) Secretary of Treasury B) Head of the Federal Reserve bank of New York C) Comptroller of the Currency D) no one
Suppose that a monopolistically competitive firm is in long-run equilibrium. The firm's demand curve is tangent to its average cost curve at Q = 25 . Average cost is minimized at Q = 35, where average cost is $50 . Which of the following is true?
a. This firm maximizes profit at an output level of 25 units. b. This firm maximizes profit at an output level of 35 units. c. This firm maximizes profit at an output level less than 25 units. d. This firm maximizes profit at an output level greater than 35 units. e. There is not enough information to find the firm's profit-maximizing level of output.
What programs will dramatically increase future deficits and debt if tax rates are not increased and spending in these programs is not reduced?
a. military and homeland security spending b. welfare and food stamp spending c. environmental restoration and transportation spending d. Social Security and Medicare spending