macro 3

What is the difference between marginal values and average​ values?

Marginal values show the additional benefit or cost from consuming an additional unit of a​ good, while average values are the benefit or cost per unit of a good.

Since optimization is used to analyze​ people's choices and help them improve the outcomes of their​ choices, its..

both normative and positive.

What is meant by comparative​ statics?

A change in an​ outcome

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

Some people choose to live close to the city​ center; others choose to live away from the city center and take a longer commute to work every day. Does this mean that those who stay away from the city center are being​ irrational?

No, because their opportunity cost of commuting must be lower.

Determine if the following statements better describe optimization in levels or optimization in differences. John is attempting to decide on a movie. He determines that the new Batman movie provides him with​ $5 more of a net benefit than the new Spiderman movie.

Optimization in​ differences, since he is calculating the change in net benefits between alternatives.

Advances in wireless communication technology reduce the​ non-financial costs of long​ commutes: People who ride trains can get work​ done, and people who drive cars have more entertainment options. Given this​ information, which of the following will be an effect on the geographic area of​ cities? How will this result impact people as they decide how close to live to the city where they​ work? They will be

The total cost of commuting from any given distance to work will reduce because the indirect cost of the commute will fall. more willing to locate further

Economists mostly use optimization in​ differences, as opposed to optimization in​ levels, because​..

comparing different features of alternatives is simple.

If opportunity cost were to suddenly​ increase, total cost would..

increase and net benefit would decrease

Optimization is the process that describes​..

the choices that households make

Optimization in levels examines​... while optimization in differences analyzes​...

total net benefits of​ alternatives; the change in net benefits.

Does the principle of optimization imply that people always make the best​ choices?

Yes, it is a good approximation for the decisions people make.