Question 1

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?

Accepted Answer

The answer of Assume that a firm wants to set...

Question 2

Which of the following statements is true?
A) Marginal analysis is a key tool used while optimizing using total value.
B) Before and after comparisons can be used in both optimization using total value and optimization using marginal analysis.
C) Marginal analysis is the comparison of economic outcomes before and after some economic variable is changed.
D) Before and after comparisons involve calculating the incremental cost of moving from one alternative to the next best alternative.

Accepted Answer

Before and after comparisons are indeed a method that can be applied in both optimization using total value and optimization using marginal analysis, allowing for the evaluation of changes or differences in scenarios or outcomes under both approaches.

Question 3

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.If Sarah is optimizing using marginal analysis,then which of the following statements is true?
A) She will rent the hotel room for 3 days if the benefit of staying for the third day exceeds the cost of staying for the third day.
B) She will rent the hotel room for 3 days if the benefit of staying for the third day exceeds the benefits of staying for the first 2 days.
C) She will rent the hotel room for 3 days if the net benefit of staying for 3 days exceeds the net benefit of staying for 2 days.
D) She will rent the hotel room for 3 days if the cost of staying for the first 2 days is less than the cost of staying for the third day.

Accepted Answer

If Sarah is optimizing using marginal analysis, she will rent the hotel room for 3 days if the benefit of staying for the third day exceeds the cost of staying for the third day.

Question 4

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.
A) 2
B) 3
C) 4
D) 5

Accepted Answer

To calculate the total cost per month, we need to add the monthly rent to the opportunity cost of time spent commuting. The total cost per month for each apartment is as follows:
Apartment 1: $1,500 + (25 * $15) = $1,875
Apartment 2: $1,200 + (20 * $15) = $1,500
Apartment 3: $1,800 + (5 * $15) = $1,875
Apartment 4: $2,000 + (10 * $15) = $2,250
Apartment 5: $1,000 + (15 * $15) = $1,250

Therefore, the total cost per month is the highest for Apartment 4, with a total cost of $2,250 per month.

Question 5

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?
A) The cost curve will move up.
B) The cost curve will move down.
C) Optimization using total value will not lead to an efficient outcome.
D) Optimization using marginal analysis will not lead to an efficient outcome.

Accepted Answer

A higher opportunity cost of time means that the individual values her time more highly. This will cause her to choose to live closer to her place of work, as it will reduce her commuting time and increase the amount of time she has to engage in other activities. As a result, the cost curve will shift up, reflecting the increased costs associated with living closer to work. Therefore, the best choice is A, as the cost curve will move up in this context.

Question 6

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 ________.
A) increases, while the indirect cost of renting the apartment remains unchanged
B) increases, while the indirect cost of renting the apartment decreases
C) remains the same, while the indirect cost of renting the apartment decreases
D) remains the same, while the indirect cost of renting the apartment increases

Accepted Answer

The individual's direct cost of renting the apartment increases from $200 to $250 per month after moving to an apartment closer to his place of work. However, the indirect cost of renting the apartment decreases from $50 per month to $0 per month as he no longer has to spend money on commuting. Therefore, the overall cost of renting the apartment decreases, and the best choice is B.

Question 7

The analysis of economic outcomes before and after some economic variable is changed is referred to as ________.
A) normative economics
B) marginal study
C) empiricism
D) before and after comparisons

Accepted Answer

Before and after comparisons involve analyzing economic outcomes before and after some economic variable is changed, and this helps in determining the effects of the change on economic outcomes. Normative economics refers to the study of what ought to be, while marginal study involves analyzing the effects of small changes in economic variables. Empiricism involves the use of empirical data to inform economic analysis.

Question 8

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?
A) Both optimization techniques will provide an efficient outcome, but optimization using total value will be faster to implement.
B) Both optimization techniques will provide an efficient outcome, but optimization using marginal analysis will be faster to implement.
C) Only optimization using marginal analysis can be used to arrive at an optimum choice. Optimization using total value will not be applicable in this case.
D) Only optimization using total value can be used to arrive at an optimum choice. Optimization using marginal analysis will not be applicable in this case.

Accepted Answer

Marginal analysis is often faster to implement as it involves comparing the additional benefits and costs of one more day, rather than calculating the total value for each option.

Question 9

The analysis of how a customer's taste for cars will change when her wealth triples falls under the scope of ________.
A) normative analysis
B) marginal research
C) cost-benefit analysis
D) before and after comparisons

Accepted Answer

Before and after comparisons involve analyzing changes in behavior or preferences due to a change in circumstances, such as an increase in wealth.

Question 10

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 ________.
A) only think about the net benefits of the extra day
B) compare the total net benefits of both alternatives
C) choose the 3-day vacation only if the costs incurred on the third day exceed the benefits he receives
D) spend more time to make a decision than he would had he used optimization using total value

Accepted Answer

Optimization using marginal analysis involves comparing the additional benefits and costs of one more unit of something. In this case, the individual will consider the net benefits (benefits minus costs) of the extra day to decide whether the 3-day vacation is worth it compared to the 2-day vacation.

Question 11

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.

Accepted Answer

The answer of Assume that an individual with an opportunity...

Question 12

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 ________.
A) 1
B) 2
C) 3
D) 4

Accepted Answer

To calculate the total cost for each apartment, we add the monthly rent to the commuting cost, which is opportunity cost per hour multiplied by the number of hours to commute to work. The total costs are:

Apartment 1: $900 + ($15 × 8) = $1020
Apartment 2: $1000 + ($15 × 3) = $1055
Apartment 3: $800 + ($15 × 10) = $950
Apartment 4: $1100 + ($15 × 4) = $1160
Apartment 5: $1200 + ($15 × 12) = $1380

Therefore, the best choice is Apartment 2 with a total cost of $1055, which is the lowest among all the options.

Question 13

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) $20
B) $150
C) $200
D) $300

Accepted Answer

The answer of Scenario: Ryan wants to rent an apartment....

Question 14

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.

Accepted Answer

The answer of An individual decides to rent an apartment...

Question 15

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?
A) 2
B) 3
C) 4
D) 5

Accepted Answer

When the opportunity cost of time increases to $60 per hour, the cost of commuting increases as well. Therefore, it makes more sense for Ryan to choose the apartment that is closest to his job, apartment 5, even though it has the highest rent of $1200 per month. The total cost for renting apartment 5 would be $1365 per month ($1200 for rent + 45 hours of commuting at $30 per hour), which is the lowest among all options.

Question 16

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?

Accepted Answer

The answer of Refer to the table below.Given that an...

Question 17

-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?
A) 1
B) 2
C) 3
D) 4

Accepted Answer

The answer of 
-Refer to the table above.If the opportunity...

Question 18

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?
A) Apartment 1
B) Apartment 2
C) Apartment 3
D) Apartment 4

Accepted Answer

Apartment 3 is the best feasible choice for the individual because it is the only apartment that meets all of the individual's requirements.

Question 19

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?
A) She will rent the hotel room for 3 days if the net benefit of staying for the third day is negative.
B) She will rent the hotel room for 3 days if the cost of staying for 2 days exceeds the cost of staying for 3 days.
C) She will rent the hotel room for 3 days if the net benefit of staying for 3 days exceeds the net benefit of staying for 2 days.
D) She will rent the hotel room for 3 days if the total benefit of staying for 3 days exceeds the total benefits of staying for 2 days.

Accepted Answer

Sarah is optimizing using total value, which means she wants to maximize the net benefit she gets from renting the hotel room. Therefore, she will choose the hotel room option that gives her the highest net benefit. Option C states that she will choose to rent the hotel room for 3 days if the net benefit of staying for 3 days exceeds the net benefit of staying for 2 days, which is the goal of optimizing for total value.

Question 20

Which of the following is an example of before and after comparisons?
A) The estimation of the quantity demanded of a good when its price is $5
B) The estimation of the demand for a particular good when consumer income is $10
C) The estimation of the ideal number of workers a firm should hire when wage rate is $20 per hour
D) The estimation of the supply of a good when the wage rate of labor changes from $30 to $10 per hour

Accepted Answer

Option D involves a change in a variable, i.e. the wage rate of labor, and its impact on the supply of a good. It presents a before and after comparison as the wage rate changes from $30 to $10 per hour. Options A and B involve single-point estimates, whereas option C does not involve a change in a variable, making D the best choice for before and after comparisons.

Quiz 3: Optimization: Doing the Best You Can

Which of the following statements is true?

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.If Sarah is optimizing using marginal analysis,then which of the following statements is true?

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

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

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 ________.

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?

-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?

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?

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?

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