Question

Determining opportunity cost Juanita is deciding whether to buy a skirt that she wants, as well as where to buy it. Three stores carry the same skirt, 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 $100 for the skirt: Store Travel Time Each Way Price of a Skirt (Minutes) (Dollars per skirt) Local Department Store 15 100 Across Town 30 86 Neighboring City 60 63 Juanita makes $56 an hour at work. She has to take time off work to purchase her skirt, so each hour away from work costs her $56 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 Opportunity Cost of Time Price of a Skirt Total Cost (Dollars) (Dollars per skirt) (Dollars) Local Department Store 100 Across Town 86 Neighboring City 63 Assume that Juanita takes opportunity costs and the price of the skirt into consideration when she shops. Juanita will minimize the cost of the skirt if she buys it from the _____ .

Answer 1