Question

Juanita makes $16 an hour at work. She has to take time off work to purchase her skirt, so each hour away from work costs her $16 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 costs of Time price of a dress total cost (Dollars) (Dollars per dress) (Dollars)Local Department Store 103Across Town 89Neighboring City 63Assume that Juanita takes opportunity costs and the price of the dress into consideration when she shops. Juanita will minimize the cost of the dress if she buys it from the _________ .

Answer 1

To minimize the total cost of buying a dress, Juanita should consider both the price of the dress and her opportunity cost of time. The total cost at each store combines the opportunity cost ($16 for one hour) and the price of the dress. The Neighboring City has the lowest total cost, and thus is the best option for Juanita.

Step-by-step explanation:

The student asks about calculating the total cost of purchasing a dress, considering the opportunity cost of Juanita's time and the price of the dress at various locations. Opportunity cost is the value of the next best alternative that is foregone when making a decision. In this scenario, Juanita earns $16 per hour, and we are to assume that it takes one hour of her time to travel to and from the store and make the purchase (30 minutes travel each way plus 30 minutes shopping).

For each store, the opportunity cost of Juanita's time will be $16 since she is missing one hour of work. The total cost at each store location will be the sum of this opportunity cost and the price of the dress at that location. Therefore, we have:

• Local Department Store: $103 (price of the dress) + $16 (opportunity cost) = $119 total cost
• Across Town: $89 (price of the dress) + $16 (opportunity cost) = $105 total cost
• Neighboring City: $63 (price of the dress) + $16 (opportunity cost) = $79 total cost

Juanita will minimize the cost of the dress if she buys it from the Neighboring City, as that location offers the lowest total cost.

Answer 2

She buys it from the "Neighboring city". The further explanation is given below.

Step-by-step explanation:

The cost of opportunity while shopping from Local dept. store:

=
`(15* 2+30)* 16`

=
`(30+30)* 16`

=
`1 \ hour* 16`

=
`16`

The cost of opportunity while shopping from across town:

=
`(30* 2+30)* 16`

=
`(60+30)* 16`

=
`1.5 \ hours* 16`

=
`24`

The cost of opportunity while shopping from neighboring class:

=
`(60* 2+30)* 16`

=
`(120+30)* 16`

=
`2.5 \ hours* 16`

=
`40`

Now,

Store Opp. Cost Price Total cost

Local dept. store 16 103 119

Across town 24 89 109

Neigh. city 40 63 103

Therefore, a Neighboring city would be the right answer.