Melanie has a choice of driving or flying from Durham, North Carolina to Knoxville, Tennessee for a one-day business trip. If she travels by air, she will be able to work seven hours in Knoxville, while if she drives, she will only have time to work four hours once there. Her expected income from each hour of work in Knoxville is $40. If Melanie a rational decision maker, she will chose to fly if and only if the price differential (air cost minus driving cost) is less than
A) $40.
B) $120.
C) $160.
D) $280.

Question

Quizplus · Accepted Answer

If Melanie flies, she will work 7 hours and earn $40 per hour, for a total of $280. If she drives, she will work 4 hours and earn $40 per hour, for a total of $160. Therefore, the price differential (air cost minus driving cost) must be less than $280 - $160 = $120 for Melanie to choose to fly.

Melanie Has a Choice of Driving or Flying from Durham