The following figure shows an individual's total cost of renting four apartments located at different distances from her place of work.

-Refer to the figure above.Other things remaining the same,assume that the individual now has a higher opportunity cost of time.Which of the following statements is true in this context?
A) The cost curve will move up.
B) The cost curve will move down.
C) Optimization using total value will not lead to an efficient outcome.
D) Optimization using marginal analysis will not lead to an efficient outcome.

Question

The following figure shows an individual's total cost of renting four apartments located at different distances from her place of work.
 
-Refer to the figure above.Other things remaining the same,assume that the individual now has a higher opportunity cost of time.Which of the following statements is true in this context?
A) The cost curve will move up. 
B) The cost curve will move down. 
C) Optimization using total value will not lead to an efficient outcome. 
D) Optimization using marginal analysis will not lead to an efficient outcome.

Quizplus · Accepted Answer

A higher opportunity cost of time means that the individual values her time more highly. This will cause her to choose to live closer to her place of work, as it will reduce her commuting time and increase the amount of time she has to engage in other activities. As a result, the cost curve will shift up, reflecting the increased costs associated with living closer to work. Therefore, the best choice is A, as the cost curve will move up in this context.

The Following Figure Shows an Individual's Total Cost of Renting