2. USAEO Microeconomics

Consumer Choice And Budget Constraints — Quiz

Test your understanding of consumer choice and budget constraints with 5 practice questions.

Practice Questions

Question 1

A consumer has a budget of $100 and faces prices of $5 for good X and $10 for good Y. What is the equation of the consumer’s budget constraint?

Question 2

If the price of good X increases from $5 to $8, and the consumer’s budget is still $100, what happens to the budget constraint line?

Question 3

A consumer maximizes utility by choosing a combination of goods X and Y such that the marginal utility per dollar spent is equal for both goods. If the marginal utility of X is $MU_X = 20$ and the marginal utility of Y is $MU_Y = 30$, and the prices are $P_X = 4$ and $P_Y = 6$, what should the consumer do to maximize utility?

Question 4

A consumer’s optimal choice is at the point where the budget constraint is tangent to the highest possible indifference curve. What does this tangency condition imply about the slopes of the budget constraint and the indifference curve at the optimal point?

Question 5

Suppose a consumer’s utility function is $U(X,Y) = XY$. The price of good X is $P_X = 2$, the price of good Y is $P_Y = 4$, and the consumer’s income is $I = 40$. What is the optimal bundle of goods X and Y that maximizes the consumer’s utility?