The price of an airline ticket from Denver to Washington, D.C. costs $600. A bus ticket costs $150. Traveling by plane takes 6 hours compared with 51 hours by bus. Other things constant, an individual would gain by choosing air travel if, and only if, his time were valued at more than
A) $6 per hour.
B) $8 per hour.
C) $10 per hour.
D) $15 per hour.

Question

Quizplus · Accepted Answer

To determine the value of an individual's time, we need to calculate the opportunity cost of choosing the bus over the plane, which is the difference in time it takes to travel by each mode of transport.

The opportunity cost of choosing the bus is: 
- 51 hours - 6 hours = 45 hours

Therefore, the individual would need to value their time at least $150 (the cost of the bus ticket) divided by 45 hours, which equals $3.33 per hour.

To choose the plane ticket, the individual would need to value their time at least $600 (the cost of the plane ticket) divided by 6 hours, which equals $100 per hour.

Therefore, the individual would gain by choosing air travel if, and only if, his time were valued at more than $100 per hour.

The closest option to this value is C) $10 per hour.

The Price of an Airline Ticket from Denver to Washington