Question

can you explain in details how did we come up with this answer and how to answer similar

NO.144 An individual is considering whether to fly or take the train for an upcoming trip. This
individual works remotely for $10/hour, but will not be able to work while on the airplane or train.
The flight would take two hours and cost $125; the train would take eight hours and cost $50. What
are the respective total economic costs of taking the flight and taking the train?
A. $20 and $80
B. $75 and $175
C. $125 and $50
D. $145 and $130
Answer: D

Answer 1

Economic cost includes both accounting costs and opportunity costs. Accounting costs are the monetary value of the goods while opportunity cost mean cost of foregoing the next best alternative.

Economic costs of taking the flight = cost of the ticket + cost of working hours lost (since s/he cannot work while on the flight)

• Cost of ticket = $125
• Working hours lost = 2 hours on the flight.
• Cost of working hours lost = 2 hours × $10/hour = $20
• Total economic cost of flight = $125 + $20 = $145

Economic costs of taking the train = cost of the ticket + cost of working hours lost (since s/he cannot work while on the train)

• Cost of ticket = $50
• Working hours lost = 8 hours on the train.
• Cost of working hours lost = 8 hours × $10/hour = $80
• Total economic cost of flight = $50 + $80 = $130