Hannah is deciding whether to buy a suit she wants as well as where to get it. Three shops carry the same suit. She can go to her local department store, located 15 minutes away from where she works, and pay $120 for the suit. She can travel to a shop across town, located 30 minutes away from where she works, and pay $90 dollars for the suit.
Finally, she can take an hour drive to out of town to a neighboring city and pay 84 for the suit. Hannah makes $85 dollars and hour where she works. She has time to take off work to purchase her suit, so each hour away from work is 80 dollars in lost income.
Assume that returning to work takes the same amount of time as getting to a shop and that it takes her 30 minutes to shop. What is the opportunity cost if she chooses to purchase the suit in the neighboring city? And assume that Hannah takes opportunity costs and the price of the suit into consideration and that she exploits opportunities to minimize the cost of her suit.
Given this assumption, where should she buy the suit?