Juanita is deciding whether to buy a skirt that she wants, as well as where to buy
Question:
Juanita is deciding whether to buy a skirt that she wants, as well as where to buy it. Three stores carry the same skirt, but it is more convenient for Juanita to get to some stores than others. For example, she can go to her local store, located 15 minutes away from where she works, and pay a marked-up price of $114 for the skirt:
Store | Travel Time Each Way | Price of a Skirt |
(Minutes) | (Dollars per skirt) | |
Local Department Store | 15 | 114 |
Across Town | 30 | 86 |
Neighboring City | 60 | 60 |
Juanita makes $30 an hour at work. She has to take time off work to purchase her skirt, so each hour away from work costs her $30 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.
Store | Opportunity Cost of Time | Price of a Skirt | Total Cost |
(Dollars) | (Dollars per skirt) | (Dollars) | |
Local Department Store | ? | 114 | ? |
Across Town | ? | 86 | ? |
Neighboring City | ? | 60 | ? |
Financial Theory and Corporate Policy
ISBN: 978-0321127211
4th edition
Authors: Thomas E. Copeland, J. Fred Weston, Kuldeep Shastri