Assume that you are considering a 7-night vacation to Fort Walton Beach, Florida, in March. You estimate the total cost of the trip to Fort Walton Beach at $1,250, including discounted airfare. However, a resort at Myrtle Beach, South Carolina, is offering 3 free nights with a 7-night stay. The advertised value of this special 3-night free offer is $397. In addition, you must use a $200 flight coupon that you received from an airline last December to compensate you for a 6-hour flight delay. After applying the $200 flight coupon and the $397 for the 3 free nights, the total out-of-pocket cost for the trip to Myrtle Beach is $1,100.
Based on the total explicit and implicit costs, should you take the trip to Fort Walton Beach or to Myrtle Beach? Explain your answer and support it with total cost estimates (explicit plus implicit) for each trip option.
To determine whether you should take the trip to Fort Walton Beach or Myrtle Beach, we need to calculate the total cost estimates for each trip option, considering both explicit and implicit costs.
1. Fort Walton Beach:
- Explicit Cost: The total cost of the trip to Fort Walton Beach is stated as $1,250, including discounted airfare.
- Implicit Cost: There are no mentioned implicit costs for this option.
- Total Cost: The total cost estimate for the trip to Fort Walton Beach is $1,250.
2. Myrtle Beach:
- Explicit Cost: The cost of a 7-night stay at a resort in Myrtle Beach is not mentioned, but we know that they are offering 3 free nights, which have an advertised value of $397. So we can consider the cost of the 4 paid nights.
- Implicit Cost: We must consider the implicit cost of using the $200 flight coupon received from the airline.
- Total Cost: The total cost estimate for the trip to Myrtle Beach is the sum of the explicit and implicit costs. 4 paid nights (unknown cost) + $397 for the 3 free nights + $200 flight coupon = Total out-of-pocket cost of $1,100.
Based on the calculations, the Myrtle Beach option seems more cost-effective. Even though the explicit cost for Fort Walton Beach is $1,250, the total out-of-pocket cost for Myrtle Beach, after factoring in the free nights and flight coupon, is $1,100. Therefore, it would be wise to choose the trip to Myrtle Beach as it offers a lower total cost.