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. Suppose the government imposes a $2.00 per gallon tax on milk. In the new general equilibrium:
A. the price of milk and the price of cereal are both higher.
B. the price of milk is higher and the price of cereal is lower.
C. the price of milk is lower and the price of cereal is higher.
D. the price of milk and the price of cereal are both lower.
B. the price of milk is higher and the price of cereal is lower.
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