Question 1

Which of the following best describes the principle of optimization at the margin?

Accepted Answer

Choosing the alternative such that moving to it makes you better off and moving away from it makes you worse off.

Question 2

Suppose your opportunity cost of time is $10/hour. If you rent an apartment that is 'Very Far' from your work and your round-trip commute takes 20 hours/month, what is the dollar cost of your commute?

Accepted Answer

$$\10$$ 	imes 20 = \$$200$$

Question 3

If the rent for a 'Very Close' apartment is $$1,180/month and the commuting cost is 50/$$month, what is the total monthly cost?

Accepted Answer

$$\1$$,180 + \$$50 = \1$$,230$

Question 4

Using marginal analysis, if moving from 'Close' to 'Far' reduces your total monthly cost by $10, what should you do?

Accepted Answer

Move to 'Far', since the marginal cost is negative.

Question 5

If the marginal cost of moving from 'Far' to 'Very Far' is $20 more per month, what does marginal analysis recommend?

Accepted Answer

Do not move to 'Very Far', since the marginal cost is positive.

Question 6

A restaurant is considering staying open an extra hour. The marginal cost is $$200 and the marginal revenue is 250. $$What is the change in profit if they stay open?

Accepted Answer

$$\250$$ - \$$200 = \50$ increase in profit

Question 7

If the marginal revenue for the last hour of operation is only $$100 and the marginal cost is 200$$, what should the restaurant do?

Accepted Answer

Close at 9:00 p.m., since marginal cost exceeds marginal revenue.

Question 8

Which of the following is NOT a reason why people may fail to optimize?

Accepted Answer

Having perfect information

Question 9

In the context of apartment selection, what does the opportunity cost of time represent?

Accepted Answer

The value of time spent commuting, measured in dollars per hour.

Question 10

According to the Portland study, what is the relationship between distance from the city center and rent prices?

Accepted Answer

Rent prices generally decrease as distance from the city center increases.

Question 11

If your opportunity cost of time increases from $$10/hour to 15/$$hour, what happens to the total cost curve for apartment selection?

Accepted Answer

The total cost curve shifts upward, making apartments with longer commutes less attractive.

Question 12

You have 1 hour to study for two quizzes: chemistry and biology. If you spend 1 hour on chemistry, your grade is 77; if you spend 1 hour on biology, your grade is 68. What is the optimal allocation to maximize your average grade?

Accepted Answer

Spend 1 hour on chemistry and 0 hours on biology; average grade is $$(77+60)/2 = 68.5$$

Question 13

You have 2 hours to study for chemistry and biology quizzes. If you spend 2 hours on chemistry, your grade is 82; if you spend 2 hours on biology, your grade is 74. What allocation maximizes your average grade?

Accepted Answer

Spend 1 hour on chemistry and 1 hour on biology; average grade is $$(77+68)/2 = 72.5$$

Question 14

You have 3 hours to study for chemistry and biology quizzes. If you spend 2 hours on chemistry and 1 hour on biology, your grades are 82 and 68, respectively. What is your average grade?

Accepted Answer

$$(82+68)/2 = 75$$

Question 15

Which of the following statements about optimization using total value and marginal analysis is correct?

Accepted Answer

Both methods yield identical answers when choosing the optimal alternative.

Question 16

If the price per square foot of apartments decreases as you move away from the city center, what economic principle does this illustrate?

Accepted Answer

Optimization in response to opportunity cost

Question 17

Which of the following is an example of domain-specific risk preference?

Accepted Answer

Preferring to take financial risks but avoiding health risks.

Question 18

What is the main advantage of using marginal analysis over total value analysis in optimization problems?

Accepted Answer

Marginal analysis focuses only on the ways that alternatives differ, making it faster to implement.

Optimization in Microeconomics: Principles, Applications, and Marginal Analysis

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