Exam 3: Optimization: Doing the Best You Can

If the total cost incurred by a firm in hiring ten workers is $45 and the total cost incurred when the eleventh worker is hired is $60,the marginal cost of hiring the eleventh worker is ________.

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?

How do markets provide for an efficient allocation of scarce resources?

An individual pays $100 every month as rent for an apartment,and his monthly opportunity cost of commuting from the apartment to his place of work is $40.Which of the following statements is then true?

-Refer to the table above.If the opportunity cost of time increases to $60 per hour,renting which apartment will turn out to be the most expensive every month?

Net benefits of an alternative equal ________.

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 ________.

What is the Principle of Optimization at the Margin? Explain with an example.

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?

John has to choose between a camping holiday and a holiday in Las Vegas.If he evaluates the total net benefit of both alternatives before coming to a decision,he is using the technique of ________.

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

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.For which of the following choices is the marginal total cost the lowest?

If Project A has a cost of $5 and provides a benefit of $10,and Project B has a cost of $2 and provides a benefit of $4,then switching from Project A to Project B ________.

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

Does optimization at the margin have any advantage over optimization using total value? Explain with the help of a suitable example.

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

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.