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1. assume milk is used to produce cheese. an increase in the price of milk will...

1. assume milk is used to produce cheese. an increase in the price of milk will cause the equilibrium price of cheese to:

a. increase and the equilibrium quantity of cheese to increase

b. increase and the equilibrium quantity of cheese to decrease

c. decrease and the equilibrium quantity of cheese to increase

d. decrease and the equilibrium quantity of cheese to decrease

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Answer #1

Answer - assume milk is used to produce cheese. an increase in the price of milk will cause the equilibrium price of cheese to:

a. increase and the equilibrium quantity of cheese to increase

Explanation- the higher price of milk will make milk producers to supply more milk to cheese manufacturers as they would be willing to pay higher price for milk. Thus the equilibrium price and quantity of cheese will reach a new level where demand will be equal to supply.

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