Chapter 3 ASSESS hw
A company mines 330,000 tons of coal per year in a rural county. The coal is worth $65 per ton. The average price for a 2,000-square-foot house with three bedrooms more than 20 km away from the mining site in this county is $240,000. The average price for a similar, 2,000-square-foot house with three bedrooms within 4 km of the mine is 5 percent lower. Using comparative statics, what is the effect of mining on home prices in this county? Mining changes the price of a 2,000-square-foot home (with three bedrooms) by $______
$-12,000
Optimization in levels examines ___________, while optimization in differences analyzes ____________.
total net benefits of alternatives; the change in net benefits.
There is a proverb "anything worth doing is worth doing well." Do you think an economist would agree with this proverb?
No, because the marginal cost of extra effort may be greater than the marginal benefit.
Scott loves to go to baseball games, especially home games of the Cincinnati Reds. All else being equal, he likes to sit close to the field. He also likes to get to the stadium early to watch batting practice. He is willing to pay $1 for every minute of batting practice that he can watch. The closer he parks to the stadium, the more batting practice he is able to watch (the garages all open simultaneously). Find Scott's optimal seat location and parking garage location using the information that follows. a) location. price. value view diamond 237. 140 club home. 97. 135 club seat. 87. 130 scout box. 83. 125 scout. 73. 105
Scott's optimal seat type is Club Seating. Scott's optimal parking is Under Stadium Parking.
Since optimization is used to analyze people's choices and help them improve the outcomes of their choices, its
both normative and positive.
You are considering renting a city apartment with 1,000 square feet for $1,800 per month. The monthly rent on a larger, 1,500-square-foot city apartment is $2,600. The marginal cost of renting an apartment with 500 additional square feet is ____ per square foot per month.
$1.6 1000+1800x=1500+2600x
Determine whether the following statements better describe optimization using total value or optimization using marginal analysis. John is attempting to decide on a movie. (All movies have the same ticket price and play at the same time/location.) He determines that the new Batman movie is preferred to the new Spider-Man movie and that both the Batman and Spider-Man movies are preferred to the new Superman movie.
Optimization using marginal analysis, since he is calculating the change in net benefits between alternatives.
Determine whether the following statements better describe optimization using total value or optimization using marginal analysis. Nikki decided to jog 3 miles for exercise by reasoning that a 3-mile jog was better than either a 2-mile jog or a 4-mile jog.
Optimization using marginal analysis, since she is calculating the difference in net benefits between alternatives.
Determine whether the following statements better describe optimization using total value or optimization using marginal analysis. At a yard sale, Reagan calculated that she was willing to pay $200 for a queen bed that was being sold for $100 (generating net benefit of $100) and that she was willing to pay $220 for a king bed that was being sold for $300 (generating net benefit of $80).
Optimization using total value, since she is comparing the net benefits between alternatives.
Advances in wireless communication technology are reducing the non-financial costs of long commutes; for example, people who ride trains can get work done, and people who drive cars have more entertainment options. How will this affect people's willingness to pay for apartments near the city center?
People will be less willing to pay for these apartments since the opportunity cost of the commute time from outside the city is decreasing. This makes the more affordable housing outside the city more attractive to people.
Suppose your total benefit from eating slices of pizza (value in dollars) is 14x-x^2 where x is the number of slices of pizza. Pizza is sold by the slice and costs $2 per slice, and so the total cost of pizza is 2x. Using optimization in levels, what is the optimal amount of pizza for you to eat?
Your net benefit is maximized at 6 slices of pizza.
You are hired as a consultant for a local restaurant. It is considering whether to close at 9:00 p.m., stay open an extra hour (10:00 p.m.), or close earlier (8:00 p.m.). Based on wages and utility bills, the added cost (the marginal cost) of staying open for each additional hour is $295. a) If the additional revenue (the marginal revenue) during the last hour is $315, the profit earned during the last hour of operation will be $____ b)If the additional revenue during the last hour is $195, the profit earned during the last hour of operation will be $___ c) If the additional revenue (the marginal revenue) from staying open until 10.00 p.m. is $295, the profit earned during the last hour of operation will be $_____
a) $20 b) $-100 c) $0
You have been invited to play a 4-hour round of golf that has a value to you of $60. The total price to play the round of golf is $25. a) The net benefit of the round of golf is ___ b) Now assume that you have a job that pays you $10 per hour. Would you be optimizing to accept the invitation to play golf?
a) $35 b) To optimize, you should not play golf.
You are a professor of economics at a university. You've been offered the position of serving as department head, which comes with an annual salary that is $8,500 higher than your current salary. However, the position will require you to work 200 additional hours per year. Suppose the next best use of your time is spending it with your family, which has value of $40 per hour. What is the difference in the net benefit from becoming the department head? a) The change in net benefit is $___ b) to optimize, you _____ become a department head
a) $500 200x20= 8,000 8,500 - 8,000= 500 b) should
You are taking two courses this semester, biology and chemistry. You have quizzes coming up in both classes. The table below shows your grade on each quiz for different numbers of hours spent studying for each quiz (For the purposes of this problem, assume that each hour of study time can't be subdivided.). For instance, the table implies that if you spent 1 hour on chemistry and 2 hours on biology, you would get a 58 on the chemistry quiz and a 70 on the biology quiz. hours chem. bio 0. 50. 58 1. 58. 65 2. 64. 70 3. 68. 73 Your goal is to maximize the sum of your grades on the two quizzes. Use the idea of optimization using marginal analysis to decide how much time you would spend studying for each quiz if you had a total of 1, 2, or 3 hours to prepare for each exam. a) If you had 1 hour, you should study _____ b) If you had 2 hours, then you should study __ hour(s) for chemistry and __ hour(s) for biology. c) If you had 3 hours, then you should study ___ hour(s) for chemistry and ___ hour(s) for biology.
a) chemistry b) 1, 1 c) 2,1
You and your friend, Jim, have just moved out of your dorm and into a new apartment. Both of you decide that you need to get a couch. Jim thinks you should get a new one from a furniture store nearby. You feel that, given your budget, it is best to buy a used one. Your other options are to buy one online or get a couch custom-made at the same furniture store. a) How would you arrive at an optimal solution here? Assume that your opportunity cost of time is $5 per hour. You and Jim would need to consider ___________. b) Now suppose that you have a summer job that pays you $15 per hour. How would your analysis change? With a $15-per-hour summer job, _________, would increase
a) the direct costs and the indirect opportunity cost of your time required to shop. b) With a $15-per-hour summer job, the opportunity cost of your time would increase.
Optimization is the process that describes __________.
the choices that people make
