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Shirley has to choose between a two-day trip and a three-day trip to Hollywood

Shirley has to choose between a two-day trip and a three-day trip to Hollywood. The table below shows the expected benefit and cost for the different days. Using optimization in levels and optimization in differences, determine what Shirley's optimum decision should be. Does the decision differ with the techniques used? Which technique is faster to implement?

 

Day

Cost

Benefit

1

$750

$800

2

$900

$1,000

3

$600

$800

38) What is meant by the term "marginal analysis"? Suppose, an individual has to choose between renting four apartments at different distances from his place of work. The individual has to commute to work on five days of the week and as such will require different quantities of gasoline depending on the apartment he decides to rent. The monthly rents and expected gasoline consumption from each of the apartments is shown in the table below. If the price of gasoline is known at $5 per gallon, using marginal analysis, determine the optimum choice for the individual. Which principal is used for this optimization? What does it state?

 

Apartment

Gasoline consumption (gallons per month)

Rent ($ per month)

1

5

1,100

2

10

1,000

3

15

960

4

20

940

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mar 14 2020 View more View Less

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