Question

Air travel from New York to Miami costs $300 and takes 6 hours. A bus ticket between the cities costs $150 and takes 56 hours. Other things constant, the minimum value of one's time that would induce a rational individual to fly rather than drive would be a. $5 per hour. b. $50 per hour. c. $3 per hour. d. $1 per hour.

Answer 1

Answer:

C. $3 per hour

Explanation:

Data given in the question

Travelling cost by air = $300

Time taken by air = 6 hours

Ticket cost of bus = $50

Time taken by bus = 56 hours

Now

The additional amount paid for the air travel

= $300 - $150

= $150

And,

Time saved from the Air travel

= 56 hours - 6 hours

= 50 hours

Hence,

The minimum value of one's time

= Additional Cost paid ÷ saving time

= $150 ÷ 50

= $3 per hour