Exam 3: Optimization: Doing the Best You Can

What is meant by the term "marginal analysis?" Suppose an individual has to choose among renting four apartments at different distances from his place of work.The individual has to commute to work 5 days per week and would require different quantities of gasoline depending on the apartment he decides to rent.The monthly rents and expected gasoline consumption from each of the apartments is shown in the table below.If the price of gasoline is $5 per gallon,using marginal analysis,determine the optimum choice for the individual.Which principle is used for this optimization? What does it state?

Refer to the table below.Given that an individual's opportunity cost of time is $30 per hour,which of the two apartments should she rent?

If the marginal total cost when moving from Option A to Option B is negative and the marginal total cost when moving from Option B to Option A is positive,which of the two options is better? What is the underlying principle behind the decision?

The following figure shows an individual's total cost of renting four apartments located at different distances from her place of work. -Refer to the figure above.Which apartment is the best feasible choice for the individual?

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 used to arrive at the optimum decision in the scenario?

Among a set of alternatives with the same benefits,an individual is said to optimize if she chooses an alternative that ________.

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.The total cost per month is the lowest if Ryan chooses to rent Apartment ________.

The following figure shows an individual's total cost of renting four apartments located at different distances from her place of work. -Refer to the figure above.Other things remaining the same,assume that the individual now has a higher opportunity cost of time.Which of the following statements is true in this context?

To carry out an optimization analysis,________.

Assume that an individual with an opportunity cost of time of $20 per hour has to choose between renting four apartments.The rents of the four apartments and the individual's monthly commuting time to work are shown in the following table.Calculate the direct cost,indirect cost,and total cost that the individual will incur if she rents any of these apartments.Also,determine the apartment that is optimum for the individual.Graph the total cost involved for the various choices.

What is meant by before and after comparisons? Is it different from the concept of marginal analysis? Explain with the help of suitable examples.

Mary has to choose between a 4-day vacation and a 5-day vacation to the same place.To arrive at the optimal choice,which optimization technique will be arithmetically easier and faster to implement and why?

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 Far over factory Very Far?

If the marginal rent cost of moving from Apartment 1 to Apartment 2 is −$60 and the marginal commuting cost of moving from Apartment 1 to Apartment 2 is $40,moving from Apartment 1 to 2 will ________.

From the table below,choose the optimum option using marginal analysis.

What are the two techniques of achieving optimization? How do the techniques differ?

Among a set of alternatives with the same total costs,an individual is said to optimize if she chooses an alternative that has the ________.

Which of the following is NOT a step involved in optimization using total value?

An individual rents an apartment for $200 per month.His monthly opportunity cost of commuting to work from this apartment is $50.After a year,he moves to an apartment closer to his place of work,but pays a rent of $250.Compared to the initial situation,after a year,his direct cost of renting the apartment ________.

Which of the following statements is true?