1-1. Stan Moneymaker needs 15 gallons of gasoline to top off his automobile\'s g
ID: 1093640 • Letter: 1
Question
1-1. Stan Moneymaker needs 15 gallons of gasoline to top off his automobile's gas tank. If he drives an extra eight miles (round trip) to a gas station on the outskirts of town, Stan can save $0.10 per gallon on the price of gasoline. Suppose gasoline costs $3.90 per gallon and Stan's car gets 25 mpg for in-town driving. Should Stan make the trip to get less expensive gasoline? Each mile that Stan drives creates one pound of carbon dioxide. Each pound of CO2 has a cost impact of $0.02 on the environment. What other factors (cost and otherwise) should Stan consider in his decision making?Explanation / Answer
Gas needed for round trip = 8/25 = 0.32 gallons
Savings = 15 * 0.10 - Cost of trip = 1.5 - 0.32*3.90 = $0.252
As savings > 0, Stan should make the trip if only private costs are considered.
However, after including for cost of pollution,
Savings = $0.252 - Cost of Pollution = $0.252 - 8*0.02 = $0.092
Even after accounting for pollution there are positive savings. Hence, Stan should make the trip for cheap gas.
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