11.NOTE:There is no graphing component to be collected for this homework. However, you should be comfortable creating two separate graphs from the above questions. You should be able to:1.Graph the consumption function both before and after the shock on one graph, and also plot equilibrium consumption and output values both before and after the shock.2.Graph the AE equation both before and after the shock on one graph, and also plot equilibrium output Y both before and after the shock.Are your results above consistent with the new economy?A) Yes, wealth in the stock market, consumer confidence, cash flow and the trade deficit all increased and animal spirits are positive. This is consistent with the new economy.B) No, wealth in the stock market, consumer confidence, cash flow and the trade deficit all increased and animal spirits are positive. This is not consistent with the new economy.Correct Answer(s):A

Table for Individual Question FeedbackPoints Earned:3.0/3.0

12.Part 2 (9 questions at 3 points each for 27 points total) Pretend that you have a lemonade stand and that the demand for lemonade in your neighborhood is estimated to be: Q = 60 - 100 PJust like in the lecture, you get all the materials to make the lemonade for free so we assume that the costs of production are zero. Your goal, your objective, is to maximize profits which is the same as maximizing total revenue given the zero cost assumption.The profit (revenue) maximizing price is cents. (don’t use a decimal point in this answer!)Table for Individual Question FeedbackPoints Earned:3.0/3.0Correct Answer(s):30

13.The profit maximizing quantity (in cups) of lemonade is .Table for Individual Question FeedbackPoints Earned:3.0/3.0

14.The corresponding maximum profit is $Table for Individual Question FeedbackPoints Earned:3.0/3.0

15.Suppose that there was a demand shock so that the new estimated demand function for lemonade in your neighborhood changes to:Q = 100 - 100 PA demand curve would change like this due to:

Table for Individual Question FeedbackPoints Earned:3.0/3.0Correct Answer(s):B16.The new profit (revenue) maximizing price is cents. (don’t use a decimal point in this answer!)Table for Individual Question FeedbackPoints Earned:0.0/3.0

17.The new profit maximizing quantity (in cups) of lemonade is .Table for Individual Question FeedbackPoints Earned:3.0/3.0