Which of the following best illustrates the concept of "derived demand"?
a. A decrease in the price of glass causes the demand for plastic to decrease.
b. An increase in the demand for bread leads to an increase in the demand for flour.
c. A decrease in the price of air travel leads to an increase in the quantity demanded of air travel.
d. An increase in the demand for peanut butter leads to an increase in the demand for jelly.
B
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All of the following are true regarding cartels except which one?
A) They are stable. B) They create a deadweight loss. C) They are illegal. D) They set the price higher than the competitive price.
The provision of a legal system is an important economic function of the government because
A) lawyers and judges tend to be high-income people. B) people need to feel safe when they go to work. C) the legal system affects how exchange takes place through its enforcement of contracts. D) the legal system affects the distribution of income through its awarding of damages in accident claims.
Compared to the purely competitive firm, a pure monopoly:
A. will always become competitive in the long run because positive economic profits will induce competitors into the market. B. is efficient from society's perspective because it has big plants and it uses the newest possible production technology. C. is able to use barriers to entry and maintain positive economic profits in the long run. D. produces an equal amount of output but charges higher prices to cover all costs in the market.
The U.S. Social Security tax is an example of a
A) progressive tax. B) proportional tax. C) premium tax. D) regressive tax.