Which of the following statements identifies a difference between optimization in levels and optimization in differences?
A) In most cases, optimization in levels is faster and easier than optimization in differences.
B) In many cases, optimization in differences is faster and easier than optimization in levels.
C) Optimization in differences compares only the cost involved in different alternatives, whereas optimization in levels compares the net benefit of different alternatives.
D) Optimization in differences compares the net benefit of different alternatives, whereas optimization in levels compares only the cost involved in different alternatives.
12) Both optimization in levels and optimization in differences:
A) consider only the benefits from different alternatives.
B) consider only the costs incurred in different alternatives.
C) provide identical answers when comparing two alternatives.
D) require the calculation of change in net benefits of switching from one alternative to another.
13) Which of the following statements identifies a similarity between optimization in levels and optimization in differences?
A) Both techniques consider only the costs of different alternatives.
B) Both techniques consider only the total benefits of different alternatives.
C) Both techniques evaluate the total net benefit of different alternatives to arrive at a decision.
D) Both techniques require the conversion of all costs and benefits into a common unit of measurement.
14) Which of the following statements is true?
A) Marginal analysis is a key component in the process of optimization in levels.
B) Only direct costs are considered when the net benefits of the alternatives are calculated.
C) In both the techniques of optimization, all costs have to be converted to the same unit of measurement.
D) Optimization in levels calculates the change in net benefits when a person switches from one alternative to another.
15) To calculate the ________ of an alternative, an individual needs to estimate ________ of the alternative.
A) marginal benefit; total cost
B) marginal cost; total benefit
C) opportunity cost; total benefit
D) net benefit; both cost and benefit
16) Net benefits of an alternative equal:
A) benefits minus costs.
B) benefits divided by costs.
C) the sum of benefits and costs.
D) the product of benefits and costs.
17) If an alternative provides a benefit of $8 to an individual at a cost of $6, the net benefits of the alternative equal:
18) When optimizing in levels, if the ________ exceeds the ________, project A is chosen over project B.
A) net benefits of project A; net benefits of project B
B) total benefits of project A; total benefits of project B
C) marginal cost of project A; marginal costs of project B
D) marginal benefits of project B; marginal benefits of project A
19) If the ________ minus the ________ is positive, project A is chosen over project B.
A) cost of project A; cost of project B
B) net benefit of project B; net benefit of project A
C) net benefit of project A; net benefit of project B
D) total benefit of project B; total benefit of project A
20) If the net benefit of Project A is $5 and that of project B is $8, switching from project A to project B:
A) reduces the net benefit by $3.
B) increases the net benefit by $3.
C) increases the net benefit by $8.
D) decreases the net benefit by $8.
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