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7. Milk is an input into the production of butter. What happens to the equilibrium price and quantity in the market for butter if the price of milk increases? A) Equilibrium price increases, equilibrium quantity decreases. B) Equilibrium price decreases, equilibrium quantity increases. C) Equilibrium price increases, equilibrium quantity increases. D) Equilibrium price decreases, equilibrium quantity decreases. 8. Butter and Margarine are substitutes in consumption. What is the impact of an increase in the price Butter on the market of Margarine? A) Equilibrium price increases, equilibrium quantity decreases. B) Equilibrium price decreases, equilibrium quantity increases. C) Equilibrium price increases, equilibrium quantity increases, D) Equilibrium price decreases, equilibrium quantity decreases. Use the graph below for the following 4 questions. The diagram illustrates the market for Widgets. 9. Given the diagram, what is the equilibrium price? A) $30 B) $50 C) $70 Price ($/unit) D) $35000 E) None of the above 100 -..:.. ..... 10. Now suppose that the government effectively fixes the price at $70 per unit. This would be considered a X ..:.. A) price floor. B) price ceiling. 50 C) tax. D) subsidy. 40 1 1. If the government effectively fixes the price at $70, -. . . . . . . . .... .. this will result in a A) surplus of 600 units. B) surplus of 400 units. 20 C) shortage of 600 units. D) shortage of 400 units. E) surplus of 200 units 200 400 600 800 1000 1200 1400 12. If the government effectively fixes the price at $70, Widgets (units) consumers expenditure on widgets would be A) $77000. B) $35000. C) $42000. D) $40000. Price (S/unit) 100 . For the next 3 questions, use the lower graph. Instead of fixing the price, suppose that the government adds a subsidy of $30 per unit. 13. With this subsidy, what is the Price paid by consumers? A) $60 B) $70 C) $30 D) $20 E) $10. 40 . . .. ....p .. ..E.. 14. As a result of the Subsidy, what price do the producers 20 receive per unit? ........ . . .- A) $80 B) $70 C) $60 D) $40 E) $30. 200 400 600 800 1000 1200 1400 15. What is the government's total subsidy expenditure? Widgets (units) A) $15000 B) $30000 C) $27000 D) $24000 E) None of the above