Juanita makes $26 an hour at work. She has to take time off work to purchase her suit, so each hour away from work costs her $26 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.
Opportunity Cost of Time Price of a Suit Total Cost
Store
(Dollars)
(Dollars per suit) (Dollars)
Local Department Store
112
Across Town
24.00
89
113.00
Neighboring City
40.00
70
Assume that Juanita takes opportunity costs and the price of the suit into consideration when she shops. Juanita will minimize the cost of the suit if
she buys it from the

Across town

Explanation:

The economic cost is determined by combining the following costs

1. Price (in Dollar) per suit

2. Opportunity cost

We are going to add up the opportunity cost (lost income) to the cost of the suit

Local department

Travel Time= 15+15= 30

Price per suit= 112

Opp cost= income lost per hour x travel time / 60 = 13.00

112+13= 125

Across town

Travel time=  24+24= 48

Price per suit= 89

Opp cost = income lost per hour x travel time / 60 =

48 is 80% of 60 = 80% of 26= 20.8 x 48= 998.4/60 = 16.64

89+17= 106

Neighboring City

Travel time= 40+40= 80

Price per suit= 70

Opp cost = income lost per hour x travel time / 60 =

80 minutes= 1 hour 20 minutes

20 minutes= 2/6 of an hour

33.33% of 26 = 8.66

Total= 8.66+ 26= 34.66 x 80= 2772.8/60 = 46.21

46.21+70= 116

So it's best for her to buy it from across town

Hope this helps! :D

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