Question

9. The day before my nephew's birthday party, I suddenly realized that I had forgotten to get him a present. I knew that he really wanted a certain LEGO toy and so resolved to do whatever it took to get it for him. I called my local neighborhood toy store, but they were out of stock. So after spending another 45 minutes calling around, I finally found it in stock for $45 at a store 1 hour away. I immediately got in the car and drove there, but just as I got there my wife called and said that the neighborhood store called her back and said they had just received a shipment of toys and had the LEGO toy that I needed on sale for $39. The neighborhood toy store is on the route back home, so I have to drive right by it on my way home from the other store.

What was the rational thing for me to do in this situation?

Group of answer choices

(a) Having sunk the cost of driving to the more expensive toy store, I should proceed to purchase the toy for $45 regardless of the gas and opportunity cost of the 1-hour drive there.

(b) Having sunk the cost of driving to the more expensive toy store, I should proceed to purchase the toy for $45 as long as the gas and opportunity cost of the 1-hour drive there exceeded $6.

(c) I should buy it from the neighborhood store for $39 only if the gas and opportunity cost of driving to the store that is 1-hour away is less than $6.

(d) I should definitely turn around and drive home and should buy the toy from the neighborhood store for $39.

(e) None of the other answers are correct.

Answer 1

Ans.- (D)

After reaching more expensive store, he has to go back to home no matter he buys the toy at $45 or not. Since, the neighborhood toy store is on the route back home he can get the same toy at $39 while driving back home. In this case the gas and opportunity cost of driving to the store that is 1-hour away shouldn't matter because its a sunk cost.