1 Opportunity cost The last week of winter break, Michael faced with a difficult
ID: 1146092 • Letter: 1
Question
1 Opportunity cost The last week of winter break, Michael faced with a difficult decision in order to make it to his first Econ 202 lecture. Michael lives in New York City. In order to arrive in time for class, he had to pick one of two travel options: (i) take a 3-hour flight from La Guardia Airport) take a 12-hour bus. Airfare was $345 and the bust costs $75. If he is not traveling, Michael can work and earn Sw per hour 1. What's the opportunity cost of 1 hour of Michael's time? (Hint: You only need to give one word, not a detailed explanation.) 2. What's the total cost of traveling by plane? Express it with an equation in terms of w 3. What's the total cost of traveling by bus? Textbook reference: "Cost-Benefit Analysis", page 9, Chapter 1 (Acemoglu, Laibson, and List) . How hig er the plane over the bus? 5. Northwestern University otters on-campus employment tor $12.50 an hour. Based on this information, what transportation option should Michael have taken?Explanation / Answer
1) Opportunity cost is the second best alternate forgone. Opportunity cost of 1hour=$w
2) total coat of travelling by bus=75+12w
3) total cost by airways=345 +3w
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