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QUESTION:

Suppose that Juanita is deciding whether or not to buy a pair of sandals that she has been researching online, and also the best place to make her purchase. Three different stores in the area sell the sandals she likes, but some stores are more convenient for Juanita to reach than others. One option is her local shoe store located only 15 minutes away from where she works, where they charge a marked-up price of $112 for the sandals:

StoreTravel Time Each WayPrice of a Sandals
(Minutes)(Dollars per sandals)
Local Shoe Store15112
Different Neighborhood in Town3098
Rural Outlet6086
Juanita earns an hourly wage of $42 at her job. In order to purchase her sandals she will have to take time off work, so each hour away from her job costs her $42 in lost income. Assume that Juanita’s travel time is the same each way (to and from the store) and that it will take her 30 minutes once she reaches a store to complete her shopping. Assume throughout the question that Juanita incurs no additional costs other than the sandals, such as gas.


ANSWER:

Complete the following table by computing the opportunity cost of Juanita's time and the total cost of shopping at each location.
StoreOpportunity Cost of TimePrice of a SandalsTotal Cost
(Dollars)(Dollars per sandals)(Dollars)
Local Shoe Store
42.00
Correct
112
154.00
Correct
Different Neighborhood in Town
63.00
Correct
98
161.00
Correct
Rural Outlet
105.00
Correct
86
191.00
Correct

Posted by Cleveland on August 28, 2024
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