Exam 3: Optimization: Doing the Best You Can

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?

Which of the following statements is true?

If Project A has a cost of $2 and provides a benefit of $3 and Project B has a cost of $5 and provides a benefit of $8,which of the following statements is true?

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

Which of the following statements is true of marginal analysis?

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 total cost incurred per month if Ryan rents Apartment 5?

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?

Shirley has to choose between a 2-day trip and a 3-day trip to Hollywood.The table below shows the expected benefit and cost for the different days.Apply both optimization using total value and optimization using marginal analysis to determine what Shirley's optimum decision should be.Does the decision differ with the techniques used? Which technique is faster to implement?

To carry out an optimization analysis,________.

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

Assume that an individual has to decide between a 2-day vacation and a 3-day vacation to the same place.If he uses optimization using marginal analysis,he will ________.

In choosing between apartments in two different locations,the marginal commuting cost is given by ________.

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?

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?

In a marketplace,prices ________.

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?

Which of the following is an example of marginal analysis?

To calculate the ________ of an alternative,an individual needs to estimate ________ of the alternative.

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?

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?