Question

Store Travel Time Each Way Price of a Dress
(Minutes) (Dollars per dress)
Local Department Store 15 104
Across Town 30 87
Neighboring City 60 80
Juanita makes $36 an hour at work. She has to take time off work to purchase her skirt, so each hour away from work costs her $36 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.
Assume 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 and Explanation:

For the local departmental store

As the person travels 30 minutes but the person sacrificed $36 for an hour at work so here the opportunity cost of the time is $36

For the across town

The person J travel time is 60 minutes ( 30 + 30) and her shopping time is 30 minutes but sacrificed $36

So the opportunity cost is

= 60 minutes + 30 minutes

= 90 minutes

= $54

For the neighbor city

The person J travel time is 120 minutes (120 + 120) and her shopping time is 30 minutes but sacrificed $36

So the opportunity cost is

= 120 minutes + 30 minutes

= 150 minutes

= $90

Now the table is

Store    Opportunity Cost            Price of a Dress      Total Cost

             of Time  

              (Dollars)                          (Dollars per dress)   (Dollars)

Local

Department

Store            36                                   104                         140

Across Town 54                                  87                          141

Neighboring City  90                          80                          170

So she should buy from the local department cost as it contains the minimum cost