Refer to Table 3.2,which shows some costs and benefits of having your car repaired.Suppose you use your car to deliver pizzas.If your wage increases from $10 to $20 per hour,what happens to your best choice of hours to spend on car repairs?
A) It increases by 1 hour.
B) It decreases by 1 hour.
C) It doesn't change.
D) It decreases by 2 hours.

Question

Refer to Table 3.2,which shows some costs and benefits of having your car repaired.Suppose you use your car to deliver pizzas.If your wage increases from $10 to $20 per hour,what happens to your best choice of hours to spend on car repairs? 
A) It increases by 1 hour. 
B) It decreases by 1 hour. 
C) It doesn't change. 
D) It decreases by 2 hours.

Quizplus · Accepted Answer

According to Table 3.2, the cost of repairing the car is $40 per hour, and it takes 4 hours to repair the car. Therefore, the cost of repairing the car is $160. On the other hand, if you deliver pizzas, you can earn $40 per hour (4 pizzas per hour, where each pizza earns you $10).

If your wage increases from $10 to $20 per hour, your opportunity cost increases. This means that the cost of spending 4 hours on repairing the car is now $80 ($20 per hour x 4 hours), instead of $40 ($10 per hour x 4 hours).

Therefore, it is now optimal to spend fewer hours on repairing the car, and more hours delivering pizzas. As a result, the best choice is to decrease the hours spent on car repairs by 1 hour, from 4 to 3 hours. This way, you can earn $120 (3 pizzas per hour x $40 per pizza), which is more than the cost of repairing the car ($80).