Exam 3: Optimization: Doing the Best You Can

Assume that an individual has to choose between two options,buying a cell phone or buying an iPad.The expected cost of buying a phone is $700 and the expected benefit is $900.The expected cost of buying an iPad is $300 and the expected benefit is $600.How does the individual arrive at the optimal choice if he implements: a)optimization using total value? b)optimization using marginal analysis?

If the net benefit of Project A is $20 and that of Project B is $15,switching from Project A to Project B ________.

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

What is meant by the term "optimization?" What do economists usually believe about how individuals optimize?

Assume that a firm wants to set up a factory.It considers four different locations.The rent of the factory space and the time taken to transport the products from each of the locations to the market is shown in the table below.It is also given that the opportunity cost of time is $10 per hour. a)Which is the optimum location? b)If the opportunity cost of time changes to $30 per hour,is there any change in the optimum?

If the net benefit of Project A is $10 and that of Project B is $12,which of the following statements is true?

Which of the following statements is true?

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.If the opportunity cost of time increases to $60 per hour,renting which apartment will minimize Ryan's total cost every month?

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 ________.

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

________ uses the concept of marginal analysis to determine the optimum choice.

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?

In a marketplace,the rental price of apartments is determined by negotiations between ________.

Which of the following statements is true?