Suppose milk and cereal are compliments and the demand for milk is Qdm = 40 - 6Pm - 2Pc, where Qdm stands for millions of gallons of milk demanded, Pm stands for the price of milk and Pc stands for the price of cereal. The supply of milk is Qsm = 6Pm - 8, where Qsm stands for millions of gallons of milk supplied. The demand and supply of cereal are Qdc = 90 - 5Pc - Pm and Qsc = 5Pc - 10, respectively, where Qdc stands for millions of boxes of cereal demanded and Qsc stands for millions of boxes of cereal supplied. Which of the following gives the market-clearing curve for cereal?
A. Pc = 100 - (Pm/10)
B. Pc = 8 - (Pm/10)
C. Pc = 10 - (Pm/10)
D. Pc = 10 + (Pm/10)
C. Pc = 10 - (Pm/10)
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What will be an ideal response?
According to supply-side economists, lower marginal tax rates will not necessarily lead to lower tax revenues because
A) the crowding out effect does not apply to taxes. B) lower tax rates have no effect on the opportunity cost of labor. C) the aggregate supply curve will shift inward to the left if the tax rates are lowered. D) the lower marginal tax rates will be applied to a growing tax base due to economic growth.