Assume that there are five apartments located at different distances from an ind
ID: 1216387 • Letter: A
Question
Assume that there are five apartments located at different distances from an individual place of work: very close, close, far, very far and extremely far. The individual makes his choice by studying the change in costs as he moves farther from his place of work. She has to choose between renting one of the five apartments. The movement from apartment Very Close to Close has a marginal cost of $60, a movement from apartment close to Far has a marginal cost of -$40, a movement from apartment Far to Vary Far has a marginal cost of -$10, and a movement from apartment Very Tar to Extremely Far has a marginal cost of $20. Refer to the scenario above. Which of the following techniques is used to arrive at tie optimum decision in the scenario? Total net benefit approach Optimization in levels Comparative statics Principal of Optimization at the Margin Total cost falls when marginal cost is and total cost rises when marginal cost is positive; negative negative; positive zero; positive zero; negativeExplanation / Answer
Answer 11:
Since he is comparing the cost levels in different situations, Comparative static is used. So, Option C.
Answer 12:
Total Cost falls when Marginal cost is negative and Total cost rises when marginal cost is positive. So, option B.