Question

Juanita is deciding whether to buy a suit that she wants, as well as where to buy it. Three stores carry the same suit, but it is more convenient for Juanita to get to some stores than others. For example, she can go to her local store, located 15 minutes away from where she works, and pay a marked-up price of $103 for the suit:Determining opportunity cost JuanitaStore Travel Time Each Way (Minutes) Price of a Suit (Dollars per suit) Local Department Store 15 103Across Town 30 88Neighboring City 60 63Juanita makes $16 an hour at work. She has to take time off work to purchase her suit, so each hour away from work costs her $16 in lost income. Assume that returning to work takes Juanita the same amount of time as getting to a store and that it takes her 30 minutes to shop. As you answer the following questions, ignore the cost of gasoline and depreciation of her car when traveling.Complete the following table by computing the opportunity cost of Juanita's time and the total cost of shopping at each location.Store Travel Time Each Way (Minutes) Price of a Suit (Dollars per suit)Local Department Store 103 Across Town 88 Neighboring City 63Assume that Juanita takes opportunity costs and the price of the suit into consideration when she shops. Juanita will minimize the cost of the suit if she buys it from the:_______

Answer 1

Answer:

The lower economic cost will be going to neighboring city as the difference in price make it worth lossing those working hours.

Explanation:

As all placed will add the same half hour for shopping we should ignore and calculate based in the difference in the price of the suit and distance travel

We should add up the opportunity cost of the labor wage lost to go destination and go back.

Local department 103 dollars + 15 minutes x 2 ( back and forth) x $16 per hour = 103 + 8 = $ 111

Across town 88 dollars + 30 min x 2 x $16 per hour

88 + 16 =   $ 104

Neighboring city $63 + 1 hours x 2 x $16 per hour

$63 + $32 = $95

The lower economic cost will be going to neighboring city as the difference in price make it worth lossing those working hours.