Juanita is deciding whether to buy a suit that she wants, as well as where to buy it. Three stores carry the same suit, 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 $100 for the suit:

Question Completion:

Store                        Travel Time Each Way       Price of a Suit

                                        (Minutes)                 (Dollars per suit)

Local Department Store           15                                 100

Across Town                            30                                   88

Neighboring City                     60                                   63

Juanita makes $16 an hour at work. She has to take time off work to purchase her suit, 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.

Juanita and Opportunity Cost:

1. Opportunity cost of Juanita's time and the total cost of shopping at each location:

Store                        Opportunity Cost    Price of a Suit     Total Cost

                                      of Time (Dollars)   (Dollars per suit)      (Dollars)

Local Department Store $16 (1 * $16)                 $100                 $116

Across Town                    24 (1.5 * $16)                  88                    112

Neighboring City             40 (2.5 * $16)                 63                   103

2. Juanita will minimize the cost of the suit if she buys it from the Neighboring City.

Explanation:

a) Data and Calculations:

Juanita's wages per hour = $16

Total Time Juanita Spent Traveling and Shopping:

Store                                Travel Time     Shopping  Total

                                       To and From        Time           Time

                                          (Minutes)       (Minutes)      (Hours)

Local Department Store     30 (15*2)          30             1.0 hr (30 + 30)

Across Town                       60 (30*2)         30             1.5 hrs (60 + 30)

Neighboring City               120 (60*2)         30            2.5 hrs (120 + 30)

answer; (inseparability);