01:220:102 Chapter 3: Chapter 3_ Optimization_ Doing the Best You Can

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periwinkleelephant338

14 May 2020

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Chapter 3: optimization: doing the best you can. When an economic agent chooses the best feasible option, she is optimizing. Optimization in levels calculates the total net benefit of different alternatives and then chooses the best alternative. Optimization in difference calculates the change in net benefits when a person switches from one alternative to another, and then uses these marginal comparisons to choose the best alternative. Optimization in levels and optimization in differences give identical answers. 3. 1 two kinds of optimization: a matter of focus. Economists believe that optimization describes most of the choices that people, households, businesses, and governments make. Economists don"t always successfully optimize, but economists try to optimize and usually do good with the given information. Optimization implemented using either of two techniques of cost-benefit analysis (both emphasize the concept of net benefit - benefit minus cost) Easier and faster because you focus on key differences between options.

Related Questions

1.According to the LAW of DEMAND, buyersâ/consumersâ buying plans are related___________ to the price of the good itselfâ¦meaning, as prices increase, the quantity demanded __________.

(1) ___________

A.Positively; decreases

B.Inversely; increases

C.Inversely; decreases

D.Positively; increases

2.According to the LAW of SUPPLY, sellersâ/producersâ selling plans are related___________ to the price of the good itselfâ¦meaning, as prices increase, the quantity supplied __________.

(2) ___________

A.Positively; decreases

B.Inversely; increases

C.Inversely; decreases

D.Positively; increases

3.Economics is the study of how people, businesses & government decide who gets what in society when faced with _____________ - the idea that we have unlimited wants/desires yet have limited resources to fulfill said wants/desires.

(3) ___________

A.Scarcity

B.A mid-life crisis

C.Surpluses

D.None of the above

4.The optimization assumption suggests that people make:

(4) ___________

A.Irrational decisions

B.Unpredictable decisions

C.Decisions that make themselves as well off as possible

D.Decisions without thinking very hard

azurebadger172

Suppose your consulting firm was hired by a city to determine if it is worth it (from an economic/social optimization perspective) to submit a bid to host the next Summer Olympics.

a. What people/groups should be included in your analysis? Why? (2 points)

b. Would your answer change if a private company were to bid to host the Olympics as opposed to a city or other public sector entity? Why or why not? (2 points)

c. List 3-5 of the most important/impactful issues you would want to consider when determining costs and benefits of hosting the Olympics? (2 points)

d. How would you measure each of the items you listed? How would you monetize each measure? Why would monetizing be necessary to conduct a CBA? (3 points)

ochredonkey828

Consider an economy where each representative agent lives for two periods. In each period t, there are N_t young individuals and N_t-1 old individuals, where Nt/Nt 1 = 1. Each young individual obtains a quantity I_t of the unique good, which can be used for consumption in period 1 c_yt or saved s_t. In the second period, when the individual is old, h/she obtains a quantity I_t+1 of the good and obtains (1 + r_t) s_t. The old individual uses the proceeds for consumption c_ot+1. Assume the individual maximizes lifetime utility U = ln (c_yt) + I² ln (c_ot+1), where 0 < I² < 1.

a) State mathematically the individual's optimization problem.

b) Solve for the individual's utility-maximizing path of consumption c_yt and c_ot+1 and of saving st.

c) Will intergenerational transactions take place? Why/why not?

blackporpoise465

01:220:102 Chapter 3: Chapter 3_ Optimization_ Doing the Best You Can

01:220:102 Full Course Notes

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