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Sergeu
1 month ago
13

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 i

s 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:_______
Business
1 answer:
Katen [3.5K]1 month ago
7 0

Answer:

The most economical option would be to travel to the neighboring city, as the price difference justifies the loss of those working hours.

Explanation:

Given that each location includes an extra half hour for shopping, we can disregard that and focus on the suit price differences and travel distances

We must also account for the opportunity cost associated with wages lost due to traveling to and from the store.

For the local department store: $103 + 15 minutes x 2 (round trip) x $16 per hour = 103 + 8 = $111

For the across-town store: $88 + 30 min x 2 x $16 per hour

$88 + 16 =  $104

For the neighboring city: $63 + 1 hour x 2 x $16 per hour

$63 + $32 = $95

The most economical choice is to shop in the neighboring city, where the cost difference makes it worthwhile to forgo those working hours.

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