Store Local Department Store Across Town Neighboring City Tr

Store Local Department Store Across Town Neighboring City Travel Time Each Way (Minutes) 15 30 60 Price of a Skirt (Dollars per skirt) 104 87 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. 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 ofJuanita\'s time and the total cost of shopping at each location Opportunity Cost of Time (Dollars) Price of a Skirt (Dollars per skirt) 104 87 80 Total Cost Store Local Department Store Across Town Neighboring City (Dollars) 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

Solution

Junita makes $36 an hour at work. This implies that loss of one hour of work means a loss of $36 in income.

If she goes to local department store then she will be spending 30 minutes (to and fro) on travelling and 30 minutes to shop. This means a total spending of 1 hour and thus would lose $36 in income.

Thus, the opportunity cost of time going to local department store is $36.

If she goes to store across town then she will be spending 60 minutes (to and fro) on travelling and 30 minutes to shop. This means a total spending of 1 hour and 30 minutes and thus would lose $54 in income.

Thus, the opportunity cost of time going to store across town is $54.

If she goes to store in neighboring city then she will be spending 120 minutes (to and fro) on travelling and 30 minutes to shop. This means a total spending of 2 hours and 30 minutes and thus would lose $90 in income.

Thus, the opportunity cost of time going to store in neighboring city is $90.

Following is the complete table -

Junita will minimize the cost of the skirt if she buys it from the Local department store.

Store	Opportunity cost of time	Price of a skirt	Total cost
Local department store	$36	$104	$140
Across town	$54	$87	$141
Neighboring city	$90	$80	$170