Francisco owns a camper and loves to visit national parks with his family. However, the family only takes two one-week trips in the camper each year. Francisco’s wife would rather stay in motels than the camper. She presented him with the following itemization of the cost per trip, hoping that he will sell the camper and use motels instead.
Cost per trip
Cost: $20,000
Usable for 10 seasons, 2 camping trips per season ..... $1,000
Transportation expense:
1,000 miles @ $0.37 per mile 370
$0.15 per mile for gasoline, oil, tires, and maintenance
$0.22 per mile for depreciation and insurance
Groceries ...................... 250
Beverages ..................... 100
Cost per trip .................... $1,720
Cost per person ($1,720/5 family members) ....... $ 344

A. What are the relevant costs for deciding whether the family should go on one more camping trip this year?
B. What are the relevant costs for deciding whether Francisco should sell the camper? Assume the family will take the same vacations but stay in motels if the camper is sold.
C. What factors other than costs might influence the decision to sell the camper? List as many as you can.
D. Consider your own preferences for this problem. Do you expect Francisco’s preferences to be the same as yours? How can you control for your biases and consider this problem from Francisco’s point of view?
E. Francisco asks you to help him decide what to do. Do you think he should sell the camper?
Why or why not?

  • CreatedJanuary 26, 2015
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