A whisky distillery in Scotland uses natural spring water to make its whisky. It

Question

A whisky distillery in Scotland uses natural spring water to make its whisky. It allows ach car load of visitors to the distillery to take 25 litres of water from the spring. The ater from the spring tastes much better than the water available in the nearby town, nd some people also believe it has health-giving properties. The spring water is vailable in the town for $1.00 a litre. The spring water is so popular that each car on average has to queue for 30 minutes to get their allocation of water. Why would an economist say that the water is not free? You visit the distillery. How would you calculate the cost of getting your 25 litres of water from the spring? Ann says she is wiling to wait up to 2 hours to get her 25 litres of water. What does this tell us about the opportunity cost of Ann's time?

Explanation / Answer

i) It's not free because customers must spend either $1/liter orwait 30 minutes to get the water. ii) One's cost depends upon their opportunity cost. Forexample, if someone who makes $20/hr misses 30 minutes of workbecause of waiting for the "free" water, then the opportunity costis $10. iii) If she is willing to wait 2 hrs rather than simply pay$1/liter for 25 liters, then her opportunity cost is less than orequal to $12.50/hr ($25/2hr).

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.