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. The formula for the market-clearing curve for milk after the tax is:
A. Pm = 4 - (Pc/6).
B. Pm = 5 - (Pc/6).
C. Pm = 5 + (Pc/6).
D. Pm = 2 - (Pc/6).
B. Pm = 5 - (Pc/6).
You might also like to view...
If politicians decide to proceed with protection, why might economists prefer tariffs to quotas? Explain at least three reasons
What will be an ideal response?
Which of the following best explains how consumer spending can decrease even if disposable income remains the same?
a. Supply may decrease, raising the price of many goods.
b. The value of the consumers’ assets, such as stocks or property, might rise.
c. Inflation reduces the purchasing power of consumers’ disposable income.
d. Higher interest rates cause an increase in saving and decrease in spending.
For this question assume that technological progress does not occur. The rate of saving in Canada has generally been greater than the saving rate in the U.S. Given this information, we know that in the long run
A) Canada's growth rate will be greater than the U.S. growth rate. B) investment per worker in Canada will be no different than U.S. investment per worker. C) capital per worker in Canada will be no different than U.S. capital per worker. D) all of the above E) none of the above
Describe the major features of the business cycle. Be sure to discuss what variables are affected by the cycle, a description of the key features that are apparent in the data, how variables are related to one another, how regular the cycle is, and how predictable the cycle is.
What will be an ideal response?