A monopolist is a price maker who will lose some business if the price is increased.

Suppose that the government imposes a $2 a cup tax on coffee. What de-termines by how much Starbucks will raise its price? How will the quantity of coffee bought in coffee shops change? Will this tax raise much revenue?

What will be an ideal response?

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.