Stan Moneymaker needs 15 gallons of gasoline to top off his automobiles\'s gas t

Question

Stan Moneymaker needs 15 gallons of gasoline to top off his automobiles's gas tank. If he drives an extra eight miles (round trip) to a gas station on the outskirts of town, stan can save $0.10 per gallon on the price of gasoline. Suppose gasoline costs $3.00 per gallon and Stan's car gets 25 mpg for in town driving. Should stan make the trip to get less expensive gasoline? Each mile that Stan drives creates one pound of carbon dioxide. Each pound of C02 has a cost impact of $0.02 on the environment. What other factors (cost and otherwise) should Stan consider in his decision making?

Explanation / Answer

To buy gas at his current location, Stan's cost would be: Cost = (15gallons)($3/gallon) Cost = $45 If Stan drives the additional 8 miles, he would need more gallons: 25miles/gallon = 8miles/x gallons 25x = 8 x = .32 gallons therefore Stan would need: 15 + 0.32 15.32 gallons The cost would be: Cost = (15.32gallons)($2.90/gallon) Cost = $44.43 He then saves: Saves = $45- $44.43 Saves = $0.57 However, he ends up costing the environment: Cost to Environment = $0.02/pound(8 pounds) Cost to environment = $0.16 Therefore, he ends up only saving: Saves = $0.57 - $0.16 Saves = $0.41 Before making his final decision, he needs to determine the extra time he would spend to drive those 8 additional miles. In that time, does he have time to do something else that is of value to him. He must determine the opportunity cost. If the cost of that time is less than $0.41, then he should make the trip. If the opportunity cost is greater than $0.41, he needs to take the gas at the moment. bol

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