Exam 3: Optimization: Doing the Best You Can

If Project X has a cost of $6 and provides a benefit of $10 and Project Y has a cost of $25 and provides a benefit of $27,which of the following statements is true?

The Principle of Optimization at the Margin states that ________.

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

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

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

When optimizing using total value,if the ________ exceed the ________,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?

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?

Spending more time commuting in exchange for a lower monthly rent is an example of ________.

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.

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

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?

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.

Gary has to decide between attending a 2-day art workshop and a 4-day art workshop.If he evaluates only the change in net benefit when he switches between the two options,he is using the technique of ________.

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

Optimization can be achieved using either of two techniques of cost-benefit analysis.Which of the following correctly identifies the techniques?

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: 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.Which is the optimum location for the firm to set up its factory?

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?

A cost-benefit calculation that focuses on the difference between a feasible alternative and the next feasible alternative is called ________.