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 $104 for the skirt:

Answer 1

Answer:

Juanita should purchase the skirt at her local store because the total economic cost will be lowest

Explanation:

three options:

• local store 15 minutes away and a price of $104
• across town 30 minutes away and a price of $88
• neighboring city 1 hour away and a price of $63

Juanita makes $42 per hour at her work, and her purchase decision includes the opportunity cost of lost wages:

total economic cost:

• local store = $104 + [1/4 hours x 2 (round trip) x $42] = $125
• across town = $88 + [1/2 hours x 2 (round trip) x $42] = $130
• neighboring city = $63 + [1 hour x 2 (round trip) x $42] = $147

Juanita should purchase the skirt at her local store because the total economic cost will be lowest ($125)