Exam 3: Optimization: Doing the Best You Can

The techniques of optimization using total value and optimization using marginal analysis ________.

In most cases,optimization using marginal analysis is faster and easier than optimization using total value because the former ________.

Optimization using marginal analysis analyzes ________.

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.What is the opportunity cost of the commute to work per month if Ryan rents Apartment 2?

________ is the incremental cost generated by moving from one feasible alternative to the next feasible alternative.

How does optimization using total value differ from optimization using marginal analysis? Assume that the city council has to choose one of the following three alternatives-setting up a school,setting up a hospital,and setting up a playground.The estimates of the expected cost and benefit of all three projects are shown in the following table.How does the city council arrive at the optimal choice if both the techniques of optimization are implemented? Do the results vary?

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 shifts will increase the total cost?

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 highest if Apartment ________ is rented.

Net benefits of an alternative equal ________.

The analysis of economic outcomes before and after some economic variable is changed is referred to as ________.

Which of the following statements is true of marginal analysis?

What are the steps involved in optimization using total value? If option A has a cost of $5 and provides a benefit of $8 and option B has a cost of $10 and provides a benefit of $15,which of the two projects is optimal?

Which of the following is an example of before and after comparisons?

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.If the firm chooses factory Far over Close,what is its marginal opportunity cost of transporting products to the market?