Question

# Store Travel Time Each Way Price of a Dress (Minutes) (Dollars per dress) Local Department Store...

Store Travel Time Each Way Price of a Dress
(Minutes) (Dollars per dress)
Local Department Store 15 103
Across Town 30 85
Neighboring City 60 63

Juanita makes \$16 an hour at work. She has to take time off work to purchase her dress, 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 Opportunity Cost of Time Price of a Dress Total Cost
(Dollars) (Dollars per dress) (Dollars)
Local Department Store 103
Across Town 85
Neighboring City 63

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 .

1. Local Department Store:

Opportunity cost of time = 60 minutes (15 min to reach store + 30 min to shop + 15 min to come back) = \$ 16
Total cost = 16 + Price of dress = 16 + 103 = \$ 119

2. Across Town:

Opportunity cost of time = 90 minutes (30 min to reach store + 30 min to shop + 30 min to come back) = \$ 16 + \$ 8 = \$ 24
Total cost = 24 + Price of dress = 24 + 85 = \$ 109

3. Neighboring City:

Opportunity cost of time = 150 minutes (60 min to reach store + 30 min to shop + 60 min to come back) = \$ 16 x 2 + \$ 8 = \$ 40
Total cost = 40 + Price of dress = 40 + 63 = \$ 103

4. Neighboring city.