Maria has to choose between driving and taking a train to destination A. Travelling by train will cost her $400 and will take 4 hours. Driving to destination A takes 6 hours, and the required amount of gasoline costs $250. Her opportunity cost of time is $15 per hour.

Which of the following statements is true?
A. Maria should choose to drive as it saves her $150
B. Maria should choose to travel by train as it saves her S150 °
C. Maria should choose to travel by train as it saves her $10.
D. Mana should choose to drive as t saves her $10

Question

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ranijoshijj97 ranijoshijj97 · Answer 1 · 2020-02-24T13:19:06+01:00

Answer:

None of the options are correct

Explanation:

The train would cost her, which is computed as:

= Cost + (Hours × Opportunity Cost)

= $400 + (4 hours × $15 per hour)

= $400 + $60

= $460

The driving would cost her, which is computed as:

= Cost + (Hours × Opportunity Cost)

= $250 + (6 hours × $15 per hour)

= $250 + $90

= $340

Savings = Train Cost - Driving Cost

= $460 - $340

=$120

None of the options are correct as the she would save $120.