Q: Suppose you value your time at $20/hour. If moving from Apartment West to East increases your commute by 2 hours per month, and East has a $25/month better view, what is the marginal net benefit of moving East?

$MNB = 25 - (2 \times 20) = -15$

Question 1

Which of the following best describes optimization in economics?

Accepted Answer

Choosing the best feasible option by comparing costs and benefits to maximize net benefit.

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, which apartment should you choose using total value analysis?

Accepted Answer

You should be indifferent, because the extra $150 in rent for Apartment A is exactly offset by the $150 value of time saved.

Question 3

What is the formula for marginal net benefit (MNB) when moving from one alternative to another?

Accepted Answer

$MNB = MB - MC$

Question 4

If the opportunity cost of your time increases from $10/hour to $15/hour, what is the likely effect on your optimal apartment choice, all else equal?

Accepted Answer

You will prefer apartments closer to work, since the cost of commuting time has increased.

Question 5

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

Accepted Answer

Both methods give identical answers when applied correctly.

Question 6

A student is 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

$25$

Question 7

Suppose you value your time at $20/hour. If moving from Apartment West to East increases your commute by 2 hours per month, and East has a $25/month better view, what is the marginal net benefit of moving East?

Accepted Answer

$MNB = 25 - (2 	imes 20) = -15$

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 unlimited resources.

Question 9

If the total cost of Apartment A is $1,200/month and Apartment B is $1,100/month, what is the marginal cost of moving from B to A?

Accepted Answer

$MC = 1,200 - 1,100 = 100$

Question 10

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

Accepted Answer

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

Question 11

A commuter is choosing between two apartments. Apartment X is $1,000/month and 10 miles from work; Apartment Y is $1,200/month and 2 miles from work. If the commuter values their time at $12/hour and spends 1 hour per 10 miles commuting per month, what is the total cost of each apartment?

Question 12

If the rent per square foot is highest at the city center and decreases as distance increases, what economic principle does this illustrate?

Accepted Answer

Opportunity cost of location.

Question 13

Suppose you are indifferent between two apartments when your opportunity cost of time is $10/hour. If your opportunity cost rises to $15/hour, what happens to your optimal choice?

Accepted Answer

You will prefer the apartment with the shorter commute.

Question 14

Which of the following is a correct application of marginal analysis in apartment selection?

Accepted Answer

Comparing the change in net benefit from moving between apartments, including all relevant costs and benefits.

Question 15

If moving from Apartment A to Apartment B increases your benefit by $30 but also increases your cost by $40, what is the marginal net benefit?

Accepted Answer

$MNB = 30 - 40 = -10$

Question 16

Which of the following is NOT a step in optimization using marginal analysis?

Accepted Answer

Ignoring changes in net benefit when comparing alternatives.

Question 17

A person is willing to pay $950 for an apartment. If the rent is $950, what is the net benefit?

Accepted Answer

$0$

Question 18

If the marginal benefit of moving from Apartment X to Y is $50 and the marginal cost is $60, what should you do according to marginal analysis?

Accepted Answer

Stay at Apartment X.

Question 19

Which of the following best explains why marginal analysis is often faster than total value analysis?

Accepted Answer

Marginal analysis focuses only on what changes between alternatives.

Optimization in Microeconomics: Choosing the Best Feasible Option

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