cost-benefit examples

cost-benefit examples - EXAMPLE: MAXIMIZING GRADES WHEN...

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EXAMPLE: MAXIMIZING GRADES WHEN TIME IS SCARCE r Suppose: Time for Exam = 1 Hour 4 Questions - Essay Type – worth 25 marks each Minutes Spent Per Question 5 10 15 20 25 30 Questions A 10 16 20 22 23.5 24 B 10 16 20 22 23.5 24 C 10 16 20 22 23.5 24 D 10 16 20 22 23.5 24
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Example 1: Maximizing Grades When Time Is Scarce r From the table on the previous slide we can see that spending 15 minutes on each question is the optimal allocation of time: r If from that allocation 5 minutes are added to anyone question then 5 minutes have to be taken away from some other question. This will result in a gain of 2 marks and a loss of 4 marks – i.e. the Marginal Benefit is 2 marks versus a Marginal (Opportunity) Cost of 4 marks and a Net Benefit of – 2 marks. r Although time itself is free (nothing has to be sacrificed in order to get it) it becomes a scarce factor because it is limited and has multiple competing (productive) uses - i.e. allocating time to anyone question has both benefits and opportunity costs.
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This note was uploaded on 06/11/2011 for the course ECON 102 taught by Professor Lemche during the Winter '08 term at UBC.

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cost-benefit examples - EXAMPLE: MAXIMIZING GRADES WHEN...

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