Question 1 – We can’t say.
There could be a variety of reasons for Frida’s root beer consumption to fall in the first case. She may really enjoy eating peanuts while drinking root beer, but not particularly enjoy doing them separately. Or, when the price of peanuts rises, she may think they’re better quality and buy more of them (making them a giffin good in her market), leaving her with less money for root beer. Or, she may want to buy a fixed amount of peanuts, regardless of cost, and thus have less money left over for root beer.

Question 3 – False

Sydney will be able to sell both housing and grocery at monopoly prices without people leaving. Saying that they’ll leave if housing prices increase is not the same as saying that they’ll leave if their expenses in general increase. Residents may not have a great deal of money to spend on groceries which will somewhat constrain their demand curve, but Sidney can still monopoly price the groceries based on this constrained demand curve without them leaving.

Thanks for sharing, Steven.

If Snidey owns all the grocery stores in the Yukon, what on earth *is* a ‘competitive price’? Competitive with what, or whom?

This post was mentioned on Twitter by MaxSupernova: The Honors Class, Part I http://www.thebigquestions.com/2009/11/20/the-honors-class-part-i/…

2
Nothing is mentioned regarding a membership fee, therefore Thomas will join providing he is ever likely to buy a banana. It would be bananas not to.

3
If Snidely raises the prices of groceries his residents will shop elsewhere as they are competitively priced, but if he raises his housing rent his residents will leave. Either way he’s worse off and presumably wouldn’t do either as he’s smart enough to have acquired all the houses in the territory.

4
Assuming he can read and chooses to employ this skill, it is efficient for you to buy the gift card as you don’t have to spend time choosing a book. If you do buy a book instead and he doesn’t like it (and lets face it, your taste in books sucks) he will swap it for one he does want and have to spend more time choosing a new one anyway. Having said that, if you do spend the time choosing a book and he does like it the kudos gained will probably outweigh the time costs as you have finally proved that your taste in books no longer sucks.

5
Only two things are inevitable; death and taxes. So you can either kill yourself, pay the taxes, or fake your own death and avoid succumbing to either.

2. Membership entails fee that needs to be advantageous to Thomas for him to sign up. In other words, the fee needs to be less than the savings he realizes by consuming the amount of bananas that he would typically consume… This would be based on his demand for bananas versus their cost. Where the two curves meet is usually the bullseye. I’m not sure about the over and under estimates, but I would guess (in my random interweb walk) that it would depend on the market for banana resale.

3. False. Housing is an investment. If the price is too high, then it’s an impossible investment. Yay, recession! Groceries are a necessity. You can charge more for necessities, especially in a monopoly.

4. Gift cards are a sham, but they show that you “care” enough to get something from a store that they like. The store receives your money faster than if you gave cash, and this could allow them to stock more books that you want… but cash would allow you to purchase those books on the internet without wasting your money on fuel to get to the store… although, you pay for that in shipping costs… so as I’m hacking through these questions… Barnes & Noble makes out, but may provide you with added benefit… however, when they go bankrupt… you lose your money. So, essentially, you’re making a bet that the store will exist long enough for your family to use their gift cards, which has some expected value depending on the reclusiveness of your family. In this economy, just give cash.

5. I don’t have the expertise to delve into, but I would rank them as follows according to preference:
all income
consumption
wages
according to who should shoulder most of the tax burden… those which are benefiting the most off of the economy. I could be convinced to put consumption above all income, but I don’t think that consumption alone would provide the necessary infrastructure and support that a sustainable system needs.

I’ve never taken an econ class outside of high school… a decade ago. I’m sure it shows, but I felt like throwing in.

Therefore:
Least despised to most:
(1) Income – behavior (investing, labor supply, consumption) all affected equally, least distortion.
(2) Wages – you would tend to over-invest (under-consume) and under supply your labor, in relation to your preferences.
(3) Consumption – you would under-consume (over-invest) and over supply your labor.