Which of the Following Best Illustrates the Concept of Derived

question 52

Multiple Choice

Which of the following best illustrates the concept of derived demand?

• A) An increase in the price of gasoline leads to an increase in the demand for small cars.
• B) An increase in the wages of autoworkers leads to an increase in the demand for robots in automobile factories.
• C) An auto firm decides to supply more minivans when there is a decrease in the demand for station wagons.
• D) An automobile firm faces an increase in the demand for cars it supplies to the market, which leads to an increase in the demand for autoworkers.

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Definitions:

Monopolistic Competition

A market structure characterized by many firms selling products that are similar but not identical, allowing for product differentiation.

ATC

Average Total Cost, which is the total cost divided by the quantity of output produced.

MR

Marginal Revenue is the additional income from selling one more unit of a good; sometimes equal to price.

Short-Run Equilibrium

A situation in which the quantity supplied and quantity demanded in a market are equal at a particular price level, but only for a temporary period.