Question

There are two restaurants that serve equally good Mexican food in a small college town. One of them charges an average of $7 per plate, and there is usually a waiting time of an hour. The other restaurant charges an average of $9 per plate, and you get a seat when you walk in. Which of the following is true?

a. People with a low opportunity cost of time compared to others would prefer the restaurant with the higher money price because they do not have to pay a higher time price.
b. The restaurant with the higher money price would be preferred by all regardless of their opportunity costs.
c. The restaurant with the lower money price would be preferred by all regardless of their opportunity costs.
d. People with a very high opportunity cost of time compared to others would prefer the restaurant with the higher money price because they are willing to accept a higher money price in return for a lower time price.

Answer 1

The restaurant with the higher money price would be preferred by people with a very high opportunity cost of time, as they are willing to accept a higher money price in return for a lower time price.

Step-by-step explanation:

The correct answer is d. People with a very high opportunity cost of time compared to others would prefer the restaurant with the higher money price because they are willing to accept a higher money price in return for a lower time price.

In this scenario, the restaurant with the higher money price charges $9 per plate but has no waiting time. If someone has a very high opportunity cost of time, it means their time is more valuable to them compared to others. So, they would be willing to pay the higher price in order to save time and avoid waiting. They are willing to accept a higher money price in return for a lower time price.

For example, if someone is a busy professional or has a lot of commitments, they may prefer to go to the restaurant that charges $9 per plate in order to save time and avoid waiting for an hour at the other restaurant.