Questions: Chapter 01 Homework Musashi earns an hourly wage of 16 at his job. In order to purchase his sunglasses, he will have to take time off work, so each hour away from his job costs him 16 in lost income. Assume that Musashi's travel time is the same each way (to and from the store) and that it will take him 30 minutes once he reaches a store to complete his shopping. Assume throughout the question that Musashi incurs no additional costs other than the sunglasses, such as gas. Complete the following table by computing the opportunity cost of Musashi's time and the total cost of shopping at each location. Assume that Musashi considers both his opportunity costs and the price of sunglasses when making his shopping decision. Musashi will minimize his cost of buying the sunglasses if he shops at the .

Chapter 01 Homework

Musashi earns an hourly wage of 16 at his job. In order to purchase his sunglasses, he will have to take time off work, so each hour away from his job costs him 16 in lost income. Assume that Musashi's travel time is the same each way (to and from the store) and that it will take him 30 minutes once he reaches a store to complete his shopping. Assume throughout the question that Musashi incurs no additional costs other than the sunglasses, such as gas.

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

Assume that Musashi considers both his opportunity costs and the price of sunglasses when making his shopping decision. Musashi will minimize his cost of buying the sunglasses if he shops at the .

Transcript text: Chapter 01 Homework Musashi earns an hourly wage of $16 at his job. In order to purchase his sunglasses, he will have to take time off work, so each hour away from his job costs him $16 in lost income. Assume that Musashi's travel time is the same each way (to and from the store) and that it will take him 30 minutes once he reaches a store to complete his shopping. Assume throughout the question that Musashi incurs no additional costs other than the sunglasses, such as gas. Complete the following table by computing the opportunity cost of Musashi's time and the total cost of shopping at each location. Assume that Musashi considers both his opportunity costs and the price of sunglasses when making his shopping decision. Musashi will minimize his cost of buying the sunglasses if he shops at the .

Solution

To complete the table and determine where Musashi should shop to minimize his total cost, we need to calculate the opportunity cost of his time and the total cost for each store.

Opportunity Cost of Time:
- Musashi earns $16 per hour.
- Travel time each way and shopping time need to be considered.
Total Cost:
- Total cost is the sum of the opportunity cost of time and the price of the sunglasses.

Let's calculate these for each store:

Store

Travel Time Each Way: 15 minutes
Shopping Time: 30 minutes
Total Time: 15 + 15 + 30 = 60 minutes = 1 hour
Opportunity Cost of Time: 1 hour * $16/hour = $16
Price of Sunglasses: $113
Total Cost: $16 (opportunity cost) + $113 (price) = $129

Local Store

Travel Time Each Way: 30 minutes
Shopping Time: 30 minutes
Total Time: 30 + 30 + 30 = 90 minutes = 1.5 hours
Opportunity Cost of Time: 1.5 hours * $16/hour = $24
Price of Sunglasses: $95
Total Cost: $24 (opportunity cost) + $95 (price) = $119

Different Neighborhood in Town

Travel Time Each Way: 60 minutes
Shopping Time: 30 minutes
Total Time: 60 + 60 + 30 = 150 minutes = 2.5 hours
Opportunity Cost of Time: 2.5 hours * $16/hour = $40
Price of Sunglasses: $74
Total Cost: $40 (opportunity cost) + $74 (price) = $114

Rural Outlet

Travel Time Each Way: Not provided, so we cannot calculate the opportunity cost or total cost for this store.

Now, let's complete the table:

\begin{tabular}{lccc} & \begin{tabular}{c} Opportunity Cost of Time \\ (In dollars) \end{tabular} & \begin{tabular}{c} Price of Sunglasses \\ (In dollars) \end{tabular} & \begin{tabular}{c} Total Cost \\ (In dollars) \end{tabular} \\ Store & $16$ & 113 & $129$ \\ \hline Local Store & $24$ & 95 & $119$ \\ Different Neighborhood in Town & $40$ & 74 & $114$ \\ Rural Outlet & $\square$ & $\square$ & $\square$ \\ \end{tabular}

Conclusion

Musashi will minimize his cost of buying the sunglasses if he shops at the Different Neighborhood in Town store, where the total cost is $114.

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