Question

Juanita makes $16 an hour at work. She has to take time off work to purchase her skirt, 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. opportunity costs of Time price of a dress total cost (Dollars) (Dollars per dress) (Dollars)Local Department Store 103Across Town 89Neighboring City 63Assume that Juanita takes opportunity costs and the price of the dress into consideration when she shops. Juanita will minimize the cost of the dress if she buys it from the _________ .

Answer 1

Answer:

She buys it from the "Neighboring city". The further explanation is given below.

Explanation:

The cost of opportunity while shopping from Local dept. store:

= $(15\times 2+30)\times 16$

= $(30+30)\times 16$

= $1 \ hour\times 16$

= $16$

The cost of opportunity while shopping from across town:

= $(30\times 2+30)\times 16$

= $(60+30)\times 16$

= $1.5 \ hours\times 16$

= $24$

The cost of opportunity while shopping from neighboring class:

= $(60\times 2+30)\times 16$

= $(120+30)\times 16$

= $2.5 \ hours\times 16$

= $40$

Now,

Store                       Opp. Cost                   Price                     Total cost

Local dept. store          16                           103                          119

Across town                 24                           89                           109

Neigh. city                    40                           63                           103

Therefore, a Neighboring city would be the right answer.