Exam 3: Optimization: Doing the Best You Can

Scenario: A firm wants to set up a factory. It has four different options. The rent of the factory in each of the four different locations and the time taken to transport the product from each location to the market is shown in the table below. The opportunity cost of time is $10 per hour. -Refer to the scenario above.What is the marginal rent cost if the firm chooses factory Very Close over factory Close?

If an alternative provides a benefit of $8 to an individual at a cost of $6,the net benefit of the alternative equals ________.

Scenario: Assume that there are five apartments located at different distances from an individual's place of work-very close, close, far, very far, and extremely far. The individual makes his choice by studying the change in costs as he moves farther from his place of work. He has to choose between renting one of the five apartments. The movement from apartment Very Close to Close has a marginal cost of −$60, a movement from apartment Close to Far has a marginal cost of −$40, a movement from apartment Far to Very Far has a marginal cost of −$10, and a movement from apartment Very Far to Extremely Far has a marginal cost of $20. -Refer to the scenario above.Which of the following is the optimum choice?

If the ________ minus the ________ is positive,Project A is chosen over Project B.

Scenario: Sarah has to choose between renting a hotel room for 2 days and renting a hotel room for 3 days. -Refer to the scenario above.Which of the following statements is true?

Scenario: Ryan wants to rent an apartment. The following table shows the monthly rent of five apartments and the number of hours per month it takes to commute to work from each apartment. Ryan's opportunity cost of time is $15 per hour. -Refer to the scenario above.If the opportunity cost of time increases to $60 per hour,renting which apartment will minimize Ryan's total cost every month?

Which of the following statements is true?

An individual decides to rent an apartment for $7,000 per month.The commuting time from this apartment to her office is 80 hours per month.If the individual's opportunity cost of time is $30 per hour,calculate the direct cost,indirect cost,and total cost she would incur per month if she rents the apartment.

Scenario: Sarah has to choose between renting a hotel room for 2 days and renting a hotel room for 3 days. -Refer to the scenario above.Which of the following is true if Sarah is optimizing using total value?

Which of the following statements identifies a difference between optimization using total value and optimization using marginal analysis?

Kevin is a student who is planning to attend a university in California.In the evening,he takes music lessons.Kevin has to find an apartment to rent.The apartment should be at a suitable distance from two places,his university and his music classes.The commuting times from apartments in four different locations to both destinations are shown in the table below.Given that Kevin's opportunity cost of time is $10 per hour,find his optimum choice by applying: a)Optimization using total value b)Optimization using marginal analysis

Scenario: A firm wants to set up a factory. It has four different options. The rent of the factory in each of the four different locations and the time taken to transport the product from each location to the market is shown in the table below. The opportunity cost of time is $10 per hour. -Refer to the scenario above.For which of the following choices is the marginal total cost the lowest?

In a marketplace,prices ________.

If the opportunity cost of time is ________ and an individual spends ________ commuting every month,the opportunity cost of her commute is $100 every month.

If the net benefit of Project A is $5 and that of Project B is $8,switching from Project A to Project B ________.

Assume that a firm wants to set up a factory.It considers four different locations.The rent of the factory space and the time taken to transport the products from each of the locations to the market is shown in the table below.It is also given that the opportunity cost of time is $10 per hour. a)Which is the optimum location? b)If the opportunity cost of time changes to $30 per hour,is there any change in the optimum?

Which of the following statements is true?

The analysis of how a customer's taste for cars will change when her wealth triples falls under the scope of ________.

Scenario: A firm wants to set up a factory. It has four different options. The rent of the factory in each of the four different locations and the time taken to transport the product from each location to the market is shown in the table below. The opportunity cost of time is $10 per hour. -Refer to the scenario above.What is the marginal opportunity cost of transporting products to the market if the firm chooses factory Far over factory Very Far?

Optimization using total value calculates ________.