Q: Suppose you are deciding between two apartments. Apartment A costs $1,200/month and is 10 hours closer to work per month than Apartment B, which costs $1,050/month. If your opportunity cost of time is $15/hour, what is the total cost of Apartment A?

$1,200 + (10 \times 15) = $1,350$

Q: A student is choosing between two apartments. Apartment X is $1,000/month and 15 hours farther from campus per month than Apartment Y, which is $1,200/month. If the opportunity cost of time is $10/hour, which apartment has the lower total cost?

Apartment X: $1,000 + (15 \times 10) = $1,150; Apartment Y: $1,200. Apartment X is cheaper.

Question 1

Which of the following best describes optimization in microeconomics?

Accepted Answer

Selecting the best feasible option by comparing total value or marginal changes.

Question 2

Suppose you are deciding between two apartments. Apartment A costs $1,200/month and is 10 hours closer to work per month than Apartment B, which costs $1,050/month. If your opportunity cost of time is $15/hour, what is the total cost of Apartment A?

Accepted Answer

$1,200 + (10 	imes 15) = $1,350$

Question 3

Optimization using total value and optimization using marginal analysis will:

Accepted Answer

Give identical answers when applied correctly.

Question 4

If the opportunity cost of your time increases from $10/hour to $15/hour, what happens to the optimal apartment choice if commuting time is a significant factor?

Accepted Answer

You are more likely to choose an apartment closer to work.

Question 5

Which formula correctly calculates marginal net benefit (MNB) when moving between two alternatives?

Accepted Answer

$MNB = MB - MC$

Question 6

You are choosing between two apartments: East ($950/month, great view valued at $25/month) and West ($950/month, no view). What is the net benefit of choosing East over West?

Accepted Answer

$950 + $25 - $950 = $25$

Question 7

If moving from West to East apartment increases your benefit by $25 but also increases your commuting cost by $40, what is the marginal net benefit?

Accepted Answer

$MNB = $25 - $40 = -$15$

Question 8

Which of the following is NOT a reason why it may be difficult to make the best choice in optimization?

Accepted Answer

Having perfect information.

Question 9

In marginal analysis, what does the symbol $\Delta$ represent?

Accepted Answer

The difference between two values.

Question 10

If the rent for apartments decreases as distance from the city center increases, what economic principle does this illustrate?

Accepted Answer

Trade-off between commuting cost and rent.

Question 11

Suppose you value your time at $20/hour and your commute is 2 hours longer per month in Apartment B than Apartment A. What is the additional monthly cost of commuting in Apartment B?

Accepted Answer

$2 	imes 20 = $40$

Question 12

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

Accepted Answer

The optimal alternative is the one where moving away makes you worse off and moving toward it makes you better off.

Question 13

If your opportunity cost of time increases, which cost component in apartment choice is most affected?

Accepted Answer

Commuting cost.

Question 14

You receive a raise and now value your time at $23/hour. If your commute is 2 hours longer per month in Apartment East than West, what is the marginal cost of moving East?

Accepted Answer

$2 	imes 23 = $46$

Question 15

Which of the following is a step in optimization using marginal analysis?

Accepted Answer

Translate all costs and benefits into common units and compare marginal changes.

Question 16

If the marginal net benefit (MNB) of moving from Apartment West to East is negative, what should you do?

Accepted Answer

Stay in West.

Question 17

Which equation represents the total value approach to optimization?

Accepted Answer

$Total\ Value = Total\ Benefit - Total\ Cost$

Question 18

A student is choosing between two apartments. Apartment X is $1,000/month and 15 hours farther from campus per month than Apartment Y, which is $1,200/month. If the opportunity cost of time is $10/hour, which apartment has the lower total cost?

Accepted Answer

Apartment X: $1,000 + (15 	imes 10) = $1,150; Apartment Y: $1,200. Apartment X is cheaper.

Question 19

Which of the following is a real-world example of opportunity cost in apartment selection?

Accepted Answer

The value of time spent commuting.

Question 20

If the marginal benefit of a great view in Apartment East is $25/month and the marginal cost of extra commuting is $20/month, what is the marginal net benefit of moving to East?

Accepted Answer

$MNB = $25 - $20 = $5$

Chapter 3: Optimization in Microeconomics – Choosing the Best Feasible Option

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