MicroEconomics Chapter 3

Reagan determined that the net benefit of taking the combination of two lecture courses and an online lecture course was​ $100. The same three courses online gave her a net benefit of​ $80, and all three in a​ lecture-based format gave her a net benefit of​ $90. A. Neither type of​ optimization, since she is not considering the net benefits of alternatives. B. Optimization in levels​, since she is making marginal comparisons. C. Optimization in​ levels, since she is comparing the net benefits between alternatives. D. Optimization in​ differences, since she is comparing total benefits between alternatives. E. Both types of​ optimization, since she is considering the total benefits of alternatives.

C

What is meant by comparative​ statics? Explain with an example. A. The effect of the best feasible​ choice, such as work​, on its marginal cost. B. Equilibria across multiple​ markets, such as labor​ markets, financial​ markets, and service markets. C. A change in an​ outcome, such as work​, that results from a change in a​ factor, such as the wage. D. Changes in net benefits when a person switches from one​ alternative, such as work​, to​ another, such as no work.

C

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. 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​ ___________. A. the indirect costs of traveling to the furniture store and the opportunity cost of your time required to shop. B. the direct costs of the price of each couch and the cost of having each couch moved to your apartment. C. the direct costs and the indirect opportunity cost of your time required to shop. D. only the price of each couch. E. only the marginal benefit of each couch.

C

Which one of the following is common between optimization using total value and optimization using marginal​ analysis? A. It calculates the change in total value and chooses the option with the highest total value as a best feasible option. B. It calculates the extra cost generated by moving from one feasible alternative to the next feasible alternative. C. It excludes the information that is not relevant to the decision. D. It is a​ cost-benefit analysis technique for optimization.

D

Marginal analysis is a cost-benefit calculation that studies the difference between a feasible alternative and the next feasible alternative

Marginal Analysis

Marginal cost is the change in total cost associated with producing one more unit of output or moving from one feasible alternative to the next feasible alternative

Marginal Cost

Does the principle of optimization imply that people always make the best​ choices? A. Yes, it is a good approximation for the decisions people make. B. Yes, because people make perfect calculations. C. No, because people are irrational. D. No, because people do not have full information. E. It cannot be tested without more data.

A

Marginal analysis is a​ cost-benefit calculation that A. focuses on the differences between one reasonable alternative and the next feasible alternative. B. analyzes the marginal revenue at points on the demand curve. C. analyzes the marginal costs at points on the demand curve. D. focuses on the similarities between one reasonable alternative and the next feasible alternative.

A

Suppose you had information on the sales of similar homes just east and just west of the boundary between two school districts. Also suppose schools on one side of the school boundary are better than the schools on the other side in terms of test scores. You could estimate the average value that parents place on a​ one-point increase in test scores by​ ___________. A. dividing the difference in the prices of similar homes between districts by the difference in test scores between districts. B. dividing the difference in the prices of big homes in one district and small homes in the other district by the difference in test scores between districts. C. dividing the difference in the prices of big and small homes in a district by the average test score in that district. D. multiplying the price of a home in either district by the difference in test scores between districts. E. dividing the difference in the prices of similar homes between districts by the average test score for both districts combined.

A

There is a proverb​ "anything worth doing is worth doing​ well." Do you think an economist would agree with this​ proverb? A. No, because the marginal cost of extra effort may be greater than the marginal benefit. B. Yes, because the marginal benefit of extra effort is typically decreasing as effort increases. C. No, because doing something well has no next best alternatives with which to compare. D. Yes, because doing something to the best of your ability is optimizing behavior. E. Yes​, because the total net benefit of extra effort is positive by definition.

A

Which of the following statements regarding marginal analysis is​ true? A. If total cost is​ rising, marginal cost could be falling. B. If total cost is​ falling, marginal cost must be positive. C. If total cost is​ rising, marginal cost must be rising. D. If total cost is​ falling, marginal cost could be zero.

A

Which of the following statements regarding marginal analysis are​ true? ​(Check all that apply.​) A. It is often faster to implement than optimization using total value. B. It always picks out a different optimum than the minimization of the total cost. C. It focuses on the difference between one feasible alternative and the next feasible alternative. D. It excludes information that is relevant to the​ individual's decision.

A, C

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? A. The total cost of commuting from any given distance to work will increase because the indirect cost of the commute will rise. B. The total cost of commuting from any given distance to work will reduce because the indirect cost of the commute will fall. C. The total cost of commuting from any given distance to work will increase because the direct cost of the train ticket will rise. D. The total cost of commuting from any given distance to work will reduce because the direct cost of the train ticket will fall.

B

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. A. Optimization in​ levels, since he is comparing the net benefits between alternatives. B. Optimization in​ differences, since he is calculating the change in net benefits between alternatives. C. Both types of​ optimization, since he is considering the total benefits of alternatives. D. Neither type of​ optimization, since he is not considering the net benefits of alternatives. E. Optimization in differences​, since he is not making marginal comparisons.

B

If opportunity cost were to suddenly​ increase, total cost would A. decrease and net benefit would decrease. B. increase and net benefit would decrease. C. decrease and net benefit would increase. D. increase and net benefit would increase.

B

Marcia finds that the net benefit of flying from Chicago to Honolulu on a​ non-stop United Airlines flight is​ $400, and the net benefit for the same trip flying on a​ one-stop American Airlines flight is​ $200. A. Both types of​ optimization, since she is not considering the total benefits of alternatives. B. Optimization in​ levels, since she is comparing the net benefits between alternatives. C. Optimization in​ differences, since she is calculating the change in net benefits between alternatives. D. Neither type of​ optimization, since she is considering the net benefits of alternatives. E. Optimization in levels​, since she is making marginal comparisons.

B

Nikki decided to take the first available parking space as she entered the student lot. She felt that the first available space had a​ $5 premium compared with all other possible spaces since she did not want to risk being late for her exam. A. Optimization in​ levels, since she is making marginal comparisons. B. Optimization in​ differences, since she is calculating the change in net benefits between alternatives. C. Both types of​ optimization, since she is considering the net benefits of alternatives. D. Optimization in​ levels, since she is comparing the net benefits between alternatives. E. Neither type of​ optimization, since she is not considering the total benefits of alternatives.

B

Optimization in levels examines​ ___________, while optimization in differences analyzes​ ____________. A. total net benefits of feasible​ alternatives; total net benefits of infeasible alternatives. B. total net benefits of​ alternatives; the change in net benefits. C. marginal benefits of​ alternatives; the change in marginal benefits. D. total benefits of​ alternatives; net benefits of alternatives. E. total benefits of​ alternatives; total costs of alternatives.

B

Optimization is the process that describes​ __________. A. how to obtain relevant data. B. the choices that people make. C. the production of resources. D. the budgeting process for people. E. how to maximize revenue.

B

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? A. Yes, because people have different preferences. B. No, because their opportunity cost of commuting must be lower. Your answer is correct.C. ​Yes, because people face direct and indirect commuting costs. D. Yes, because their direct commuting costs must be higher. E. No, because people face the same living costs in and away from the city.

B

Behavioral economics jointly analyzes the economic and psychological factors that explain human behavior

Behavioral Economics

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? A. The total cost of commuting from any given distance to work will increase because the direct cost of the train ticket will rise. B. The total cost of commuting from any given distance to work will reduce because the direct cost of the train ticket will fall. C. The total cost of commuting from any given distance to work will increase because the indirect cost of the commute will rise. D. The total cost of commuting from any given distance to work will reduce because the indirect cost of the commute will fall.

D

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? A. The total cost of commuting from any given distance to work will increase because the indirect cost of the commute will rise. B. The total cost of commuting from any given distance to work will reduce because the direct cost of the train ticket will fall. C. The total cost of commuting from any given distance to work will increase because the direct cost of the train ticket will rise. D. The total cost of commuting from any given distance to work will reduce because the indirect cost of the commute will fall.

D

Optimization in levels examines​ ___________, while optimization in differences analyzes​ ____________. A. marginal benefits of​ alternatives; the change in marginal benefits. B. total benefits of​ alternatives; net benefits of alternatives. C. total benefits of​ alternatives; total costs of alternatives. D. total net benefits of​ alternatives; the change in net benefits. E. total net benefits of feasible​ alternatives; total net benefits of infeasible alternatives.

D

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? A. Yes, because their direct commuting costs must be higher. B. Yes, because people have different preferences. C. No, because people face the same living costs in and away from the city. D. No, because their opportunity cost of commuting must be lower. E. Yes, because people face direct and indirect commuting costs.

D

Suppose you had information on the sales of similar homes just east and just west of the boundary between two school districts. Also suppose schools on one side of the school boundary are better than the schools on the other side in terms of test scores. You could estimate the average value that parents place on a​ one-point increase in test scores by​ ___________. A. dividing the difference in the prices of big and small homes in a district by the average test score in that district. B. dividing the difference in the prices of similar homes between districts by the average test score for both districts combined. C. dividing the difference in the prices of big homes in one district and small homes in the other district by the difference in test scores between districts. D. dividing the difference in the prices of similar homes between districts by the difference in test scores between districts. Your answer is correct.E. multiplying the price of a home in either district by the difference in test scores between districts.

D

Optimization is the process that describes​ __________. A. how to maximize wealth. B. how to obtain relevant data. C. the budgeting process for governments. D. the production of resources. E. the choices that people make.

E

The optimum is the best feasible choice. In other words, the optimum is the optimal choice

Optimum

The principle of optimization at the margin states that an optimal feasible alternative has the property that moving to it makes you better off and moving away from it makes you worse off

Principle of optimization at the margin