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Consumer Optimization Practice Questions

1. Suppose after paying bills and setting aside some money for retirement, Joana has $130 dollars left to spend on just two goods: concerts and books. For simplicity, we’ll assume concert tickets cost $55 and books cost $10. Which of the following combination of goods could possibly be her utility-maximizing bundle? *

a. 3 concert tickets and 2 books

b. 2 concert tickets and 2 books

c. 1 concert ticket and 5 books

d. 1 concert ticket and 10 books

For the following two questions, assume Good X is measured on the x-axis and Good Y is measured on the y-axis.

2. If the price ratio of two goods is 1.5 and the marginal rate of substitution is 2, then the market values ________________ more than the consumer does, and the consumer values ______________ more than the market does. *

a. Good X, Good Y

b. Good Y, Good X

c. Cannot be determined from the given information.

3. In the above example, the consumer ought to buy less of _________________ and more of _____________________. *

a. Good X, Good Y

b. Good Y, Good X

c. Cannot be determined from the given information.

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Principles of Economics Microeconomics

Course (105 videos)

Introduction

Introduction to Microeconomics

Practice Questions

Opportunity Cost and Tradeoffs

Practice Questions

Marginal Thinking and the Sunk Cost Fallacy

Practice Questions

Interactive Practice

Supply, Demand, and Equilibrium

The Demand Curve

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The Supply Curve

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The Equilibrium Price and Quantity

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Understanding the Demand Curve: Shifts and Consumer Surplus

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Interactive Practice

What Shifts the Demand Curve?

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Change in Demand vs. Change in Quantity Demanded

Interactive Practice

Understanding the Supply Curve: Shifts and Producer Surplus

Interactive Practice

What Shifts the Supply Curve?

Interactive Practice

Exploring Equilibrium

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Interactive Practice

Supply and Demand Terminology

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Does the Equilibrium Model Work?

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Elasticity and Its Applications

Elasticity of Demand

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Calculating the Elasticity of Demand

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Office Hours: Elasticity of Demand

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Elasticity of Supply

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Elasticity of Supply: Why Housing is Unaffordable

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Elasticity of Supply: Do Gun Buybacks Work?

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Taxes and Subsidies

Commodity Taxes

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Who Pays the Tax?

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Tax Revenue and Deadweight Loss

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The Price System

A Price Is a Signal Wrapped up in an Incentive

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Markets Link the World

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The Great Economic Problem

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Information and Incentives

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Prediction Markets

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Price Ceilings and Price Floors

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Price Ceilings: Shortages and Quality Reduction

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Price Ceilings: Lines and Search Costs

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Price Ceilings: Deadweight Loss

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Price Ceilings: Misallocation of Resources

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Price Ceilings: Rent Controls

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Rent Control in Mumbai

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Price Floors: The Minimum Wage

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Price Floors: Airline Fares

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Why Do Governments Enact Price Controls?

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Price Controls and Communism

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Trade

The Big Ideas of Trade

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Comparative Advantage

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Another Look at Comparative Advantage

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Comparative Advantage Homework

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Tariffs and Protectionism

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Arguments Against International Trade

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Avengers: The Story of Globalization (Optional)

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Externalities

What Are Negative Externalities?

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Pigouvian Taxes

What Are Positive Externalities?

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Pigouvian Subsidies

Command and Control Solutions

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The Coase Theorem

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Trading Pollution

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A Deeper Look at Tradable Allowances

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Externalities and Incentives: The Economics of COVID

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Costs and Profit Maximization Under Competition

Introduction to the Competitive Firm

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Maximizing Profit Under Competition

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Maximizing Profit and the Average Cost Curve

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Entry, Exit, and Supply Curves: Increasing Costs

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Entry, Exit, and Supply Curves: Constant Costs

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Entry, Exit, and Supply Curves: Decreasing Costs

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Competition and the Invisible Hand

Minimization of Total Industry Costs of Production

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The Balance of Industries and Creative Destruction

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Monopoly

Maximizing Profit Under Monopoly

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Office Hours: Calculating Monopoly Profit

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The Monopoly Markup

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The Costs and Benefits of Monopoly

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Price Discrimination

Introduction to Price Discrimination

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The Social Welfare of Price Discrimination

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Practice Questions

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Labor Markets

The Marginal Product of Labor

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Econ Duel: Is Education Signaling or Skill Building?

Human Capital and Signaling

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The Tradeoff Between Fun and Wages

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Compensating Differentials

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Do Unions Raise Wages?

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Public Goods and the Tragedy of the Commons

Public Goods and Asteroid Defense

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A Deeper Look at Public Goods

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Practice Questions

The Tragedy of the Commons

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Asymmetric Information

Asymmetric Information and Used Cars

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Asymmetric Information in Health Insurance

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Practice Questions

Solutions to Moral Hazard

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Practice Questions

Consumer Choice

Introduction to Consumer Choice

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Budget Constraints

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Indifference Curves

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Consumer Optimization

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Office Hours: Game Theory

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Principles of Economics: Microeconomics

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