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 each car load of visitors to the distillery to take 25 litres of water from the spring. The water 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) In terms of economics, time is also considered a cost. When youqueue for 30 minutes to get the spring water, you have to give upthe next best alternative. Thus, the water is not free. (II) TOTAL COST = Transportation cost to the spring + Opportunitycost of queue for the spring water (III) This tell us Ann is very free since she don't mind to queeuefor so long. Thus, it is deduced that the opportunity cost of Ann'stime is considered low compare to other people. Also, the next bestalternative in terms of opportunity cost may be very similar tooppotunity cost of queue for spring water. Thus, Ann is willing togive up the next best alterbative for the spring water. Hope this helps!

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

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