Econ 222 Chapter 3-A
What are the different ways in which apartments are allocated in cities?
By public housing authorities.
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 one unit of a good.
What is meant by comparative statics? Explain with an example.
A change in an outcome, such as work, that results from a change in factor, such as wage.
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.
Neither, since she is not considering the total benefits of alternatives.
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.
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.
Does the principle of optimization imply that people always make the best choices?
Yes, it is a good approximation for the decisions people make.
The concept of opportunity cost would explain whether someone chooses to drive, take a cab, take a bus, or walk to school or work because someone with ___________.
a high wage is more likely to drive or take a cab to work because his time is worth more.
Optimization is the process that describes ________.
the choices that firms make.
Those who are willing to pay the most to get an apartment are most likely to get an apartment when they are allocated by________.
the market.
Optimization in levels examines ___________, while optimization in differences analyzes ____________.
total net benefits of alternatives; the change in net benefits.
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.