Midterm

* Question 1

4 out of 4 points

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| Which of the following would shift the demand curve for gasoline in the current period to the right? | | | |

| Selected Answer: | b. an increase in consumer income, assuming gasoline is a normal good |

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* Question 2

4 out of 4 points

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| Suppose that a decrease in the price of good X results in fewer units of good Y being sold.  This implies that X and Y are

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| Selected Answer: | substitute goods. |

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* Question 3

4 out of 4 points

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| Which of the following would lead to a DECREASE in the demand for tennis balls? | | | |

| Selected Answer: | A decrease in average household income when tennis balls are a normal good |

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* Question 4

4 out of 4 points

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| When Sonoma Vineyards reduces the price of its Cabernet Sauvignon from $15 a bottle to $12 a bottle, the result is an increase in | | | |

| Selected Answer: | the quantity of this wine demanded. |

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* Question 5

4 out of 4 points

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| Use the following general linear demand relation to answer questions 5 through 8:

Qd = 680 – 9P + 0.006M – 4PR

where M is income and PR is the price of a related good, R.

From this relation it is apparent that the good is: | | | |

| Selected Answer: | both c and d |

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* Question 6

4 out of 4 points

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| If M = $15,000 and PR = $20, the demand function is | | | |

| Selected Answer: | Qd

= 690 – 9P. |

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* Question 7

4 out of 4 points

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| If M = $15,000 and  PR = $20 and the supply function is Qs

= 30 + 3P, equilibrium price and quantity are, respectively,

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| Selected Answer: | P = $55 and Q = 195. |

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* Question 8

4 out of 4 points

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| If M = $15,000 and PR = $20 and the supply function is Qs

= 30 + 3P, then, when the price of the good is $60,

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