ECO 2020 Chapter 03 Homework

A company mines 300,000 tons of coal per year in a rural county. The coal is worth ​$73 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 6 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 _____________ ​(Round your response to two decimal places and use a negative sign if necessary.​)

(240,000*6%)= - 14400

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

1. D 2. the opportunity cost of your time

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 ​$7,500 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 ​$20 per hour. What is the difference in the net benefit from becoming the department​ head? The change in net benefit is_________ . ​(Enter your response as an integer.​) To​ optimize, you _______ become a department head

20*200=4000 7500-4000=3500 SHOULD

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 _____ slices of pizza. ​(Enter your response as an integer.​)

6 14x-x^2-2x = 12-x^2 12-2x= 12=2x 6=x

Since optimization is used to analyze​ people's choices and help them improve the outcomes of their​ choices, its A. both normative and positive. Your answer is correct. B. positive only. C. normative only. D. neither because it doesn't show people who don't optimize how to improve their well−being.

A

Which of the following statements regarding the principle of optimization is​ true? ​(Check all that apply.​) A. It is the unifying principle that connects various seemingly unrelated decisions. Your answer is correct. B. It applies only in the case of monetary and financial matters. C. It takes into account and evaluates multiple​ trade-offs. Your answer is correct. D. It means always choosing the best feasible option.

A AND C

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. Your answer is correct. C. total benefits of​ alternatives; total costs of alternatives. D. marginal benefits of​ alternatives; the change in marginal benefits. E. total benefits of​ alternatives; net benefits of alternatives.

B

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

B

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. Optimization in levels​, since she is making marginal comparisons. B. Optimization in​ levels, since she is comparing the net benefits between alternatives. Your answer is correct. C. Neither type of​ optimization, since she is not considering the net benefits of alternatives. D. Both types of​ optimization, since she is considering the total benefits of alternatives. E. Optimization in​ differences, since she is comparing total benefits between alternatives.

B

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. multiplying the price of a home in either district by the difference in test scores between districts. B. dividing the difference in the prices of similar homes between districts by the difference in test scores between districts. Your answer is correct. 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 big and small homes in a district by the average test score in that district. E. dividing the difference in the prices of similar homes between districts by the average test score for both districts combined.

B

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

B

Economists mostly use optimization in​ differences, as opposed to optimization in​ levels, because​ ____________. A. examining the net benefits of alternatives is counterintuitive. B. contrasting the total benefit of alternatives is intuitive. C. comparing different features of alternatives is simple. Your answer is correct. D. calculating​ cost-benefit ratios is complicated

C

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

C

What is the difference between marginal values and average​ values? A. Marginal values show the benefit from consuming an additional unit of a​ good, while average values are the cost from consuming an additional unit of a good. B. Marginal values show the ordinal benefit or cost from consuming an additional unit of a​ good, while average values are the cardinal benefit or cost from consuming an additional unit of a good. C. 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. Your answer is correct. D. Marginal values show the benefit or cost from consuming one unit of a​ good, while average values are the benefit or cost from consuming all units of a good. E. Marginal values show the total benefit or cost from consuming a​ good, while average values are the total benefit or cost from consuming a good divided by the amount of the good consumed.

C

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

D

In which of the following situations is optimization a good description of​ behavior? A. Rita watches movies late at night. The next​ day, she wakes up late causing her to be late to her exam. B. John is careless and irresponsible causing him to make a lot of mistakes in his work. C. ​Kat, the MIT business management​ graduate, starts his first business and incurs huge financial losses despite graduating from MIT. D. Tia is a very fun loving person. She chooses to go on a vacation with friends instead of volunteering at NGO as a vacation is more enjoyable.

D

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 differences​, since she is making marginal comparisons. C. Optimization in​ differences, since she is calculating the change in net benefits between alternatives. Your answer is not correct. D. Neither type of​ optimization, since she is considering the net benefits of alternatives. E. Optimization in​ levels, since she is comparing the net benefits between alternatives.

E

You are considering renting a city apartment with​ 1,000 square feet for ​$1,600 per month. The monthly rent on a​ larger, 1,500-square-foot city apartment is ​$2,300. The marginal cost of renting an apartment with 500 additional square feet is _______ per square foot per month

The marginal cost of renting an apartment =(2300-1600)/(1500-1000) =1.4 per square foot per month

You have been invited to play a​ 4-hour round of golf that has a value to you of ​$80. The total price to play the round of golf is ​$25. The net benefit of the round of golf is ​________ Now assume that you have a job that pays you ​$6 per hour. Would you be optimizing to accept the invitation to play​ golf? To​ optimize, you should ____________ golf.

The net benefit of the round of golf is 55 (60-45) The opportunity cost of your time required to play a round of golf is ​$24 (6*4) So, $55-24= 31 Play