Question

< Back to Assignment Just Music Attempts: Keep the Highest: 12 2. Determining opportunity cost Aa Aa Frances is deciding whether to buy a dress that she wants, as well as where to buy it. Three shops carry the same dress. She can go to her local department store, located 15 minutes away from where she works, and pay $120 for the dress. She can travel to a shop across town, located 30 minutes away from where she works, and pay $90 for the dress. Finally, she can take a one-hour drive out of town to a neighboring city and pay $85 for the dress. Frances makes $30 an hour at work. She has to take time off work to purchase her dress, so each hour away from work costs her $30 in lost income. Assume that returning to work takes Frances the same amount of time as getting to a shop and that it takes her 30 minutes to shop. Answer the following questions, ignoring the cost of gasoline and depreciation of her car when traveling. The opportunity cost of Frances's time if she chooses to purchase the dress in the shop across town is Western Arabic Assume that Frances takes opportunity costs and the price of the dress into consideration and that she exploits opportunities to minimize the cost of her dress. Given these assumptions, if Frances buys a dress, she will purchase it from ONA 3.16 2004-2016 Arts reserved 2013 Cengage Learning excetas moted. All rights reserved Grade it Now Save & Continue Continue without saving

Answer 1

Answer

1.

Zero - as it is the best alternative

2.

across town -  best alternative

Let's find out the costs for each shop

For local department

Time to travel (to and fro)=30mins

Time to shop = 30 mins

Total time = 30+30=1hr

Cost of time spent = 1x30=$30

Total cost =120+30=$150

For across town

Time to travel (to and fro)=60mins

Time to shop = 30 mins

Total time = 60+30=1.5hr

Cost of time spent = 1.5x30=$45

Total cost =90+45=$135

For neighbouring city

Time to travel (to and fro)=120mins

Time to shop = 30 mins

Total time = 120+30=2.5hr

Cost of time spent = 2.5x30=$75

Total cost =85+75=$160

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