Eco 202 Chapter 3
If the additional revenue during the last hour is $127, the profit earned during the last hour of operation will be $ nothing.
-100
If the additional revenue (the marginal revenue) from staying open until 10.00 p.m. is $227, the profit earned during the last hour of operation will be
0
If you had 3 hours, then you should study __________ hour(s) for chemistry and _______________ hour(s) for biology. (Enter your responses as integers.)
2,1
What is meant by comparative statics? Explain with an example.
A change in an outcome, such as consumption, that results from a change in a factor, such as the price.
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.
The total cost of commuting from any given distance to work will reduce because the indirect cost of the commute will fall.
In which of the following cases, will the profit of the firm be maximized?
When the marginal cost of producing an additional unit equals the marginal revenue from that unit.
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 studying for each quiz. For instance, the second row implies that one hour of studying for Chemistry will generate an expected grade of 77 on Chemistry, whereas one hour of studying for Biology will generate an expected grade of 78 on Biology. Your goal is to maximize your average grade on the two quizzes. Use the idea of optimization in differences 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. If you had 1 hour, you should study ▼
chemistry
Marginal analysis is a cost-benefit calculation that
focuses on the differences between one feasonable alternative and the next feasible alternative.
In general, apartment rental prices ▼ as the opportunity cost of commuting rises, indicating a strong ▼ relationship between rents and commutes.
increase, negative
How will this result impact people as they decide how close to live to the city where they work? They will be ▼
more willing to locate farther from the city
Optimization is the process that describes __________.
the choices that businesses make.
Optimization in levels examines ___________, while optimization in differences analyzes ____________.
total net benefits of alternatives; the change in net benefits.
Suppose you have just landed a job near the center of a city and you now need to decide where to live. If you live close to the city center, your round-trip commute will be 15 minutes. If you live in the distant suburbs, your round-trip commute will be 60 minutes. There are lots of workers like you who work downtown. Since there are only a limited number of apartments near the city center, these apartments will be allocated based on ▼ that you face. This process is known as ▼ .
both the costs and benefits, optimization
Which of the following statements regarding marginal analysis is true?
If total cost is rising, marginal cost could be falling.
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.
When optimizing for total value, opportunity cost must be ▼ total cost. Assuming ▼ benefits, the lowest cost option is the optimal choice.
added to, equal
Marginal analysis ▼ picks out ▼ optimum as minimization of total cost.
always, the same
If you had 2 hours, then you should study ___________ nothing hour(s) for chemistry and _________________ nothing hour(s) for biology. (Enter your responses as integers.)
1,1
Maria can purchase shirts for $25.00 each. She considers the benefit of one shirt to be $45.00, but with each additional shirt she purchases the benefit decreases by $5. According to the Principle of Optimization at the Margin, Maria will purchase ________ shirts. (Enter your response as a whole number.)
4
The profit-maximizing level of output is _____ units.
4
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 $227. If the additional revenue (the marginal revenue) during the last hour is $267, the profit earned during the last hour of operation will be $ nothing.
40
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
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.
Optimization in differences, since she is calculating the change in net benefits between alternatives.
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.
Optimization in levels, since she is comparing the net benefits between alternatives
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.
Economists mostly use optimization in differences, as opposed to optimization in levels, because ____________.
comparing different features of alternatives is simple
Suppose your firm has a marginal revenue given by the equation MR equals 10 minus Upper QMR = 10 − Q, where Q is the quantity produced and sold. This means that the seventh unit of output brings in 10 minus 7 equals $ 310 − 7 = $3 of additional revenue. The marginal cost for your firm is given by the equation MC equals 2 plus Upper QMC = 2 + Q. This means that the seventh unit of output increases the marginal cost by 2 plus 7 equals $ 92 + 7 = $9. If the firm produces the seventh unit of output, marginal cost will be ▼ marginal revenue.
greater than
When John determines what choice of walking shoes will give him the best bang for his buck, he is using optimization based on ▼ . When Janet looks at the additional value of purchasing a new laptop to the cost as compared to keeping her old one, she is using optimization based on ▼ .
total value, marginal analysis
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.
Does the principle of optimization imply that people always make the best choices?
Yes, it is a good approximation for the decisions people make.
If opportunity cost were to suddenly increase, total cost would
increase and net benefit would decrease.
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.
optimization in levels, since she is comparing the net benefits between alternatives
