Determining opportunity cost Suppose that Ciana 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 Ciana 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 $110 for the sandals: Store Travel Time Each Way Price of a Sandals (Minutes) (Dollars per sandals) Local Shoe Store 15 110 Different Neighborhood in Town 30 97 Rural Outlet 60 73 Ciana earns an hourly wage of $56 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 $56 in lost income. Assume that Ciana’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 Ciana incurs no additional costs other than the sandals, such as gas. Complete the following table by computing the opportunity cost of Ciana's time and the total cost of shopping at each location. Store Opportunity Cost of Time Price of a Sandals Total Cost (Dollars) (Dollars per sandals) (Dollars) Local Shoe Store 110 Different Neighborhood in Town 97 Rural Outlet 73 Assume that Ciana considers both her opportunity costs and the price of sandals when making her shopping decision. Ciana will minimize her cost of buying the sandals if she shops at the STORE IN THE DIFFERENT NEIGHBORHOOD IN TOWN, or LOCAL SHOE STORE or RURAL OUTLET

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Determining opportunity cost

Suppose that Ciana 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 Ciana 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 $110 for the sandals:

Store	Travel Time Each Way	Price of a Sandals
(Minutes)	(Dollars per sandals)
Local Shoe Store	15	110
Different Neighborhood in Town	30	97
Rural Outlet	60	73

Ciana earns an hourly wage of $56 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 $56 in lost income. Assume that Ciana’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 Ciana incurs no additional costs other than the sandals, such as gas.

Complete the following table by computing the opportunity cost of Ciana's time and the total cost of shopping at each location.

Store	Opportunity Cost of Time	Price of a Sandals
(Dollars)	(Dollars per sandals)	(Dollars)
Local Shoe Store		110
Different Neighborhood in Town		97
Rural Outlet		73

Assume that Ciana considers both her opportunity costs and the price of sandals when making her shopping decision. Ciana will minimize her cost of buying the sandals if she shops at the STORE IN THE DIFFERENT NEIGHBORHOOD IN TOWN, or LOCAL SHOE STORE or RURAL OUTLET.

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