Answered: Round Trips Total Utility Phone Minutes…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Jeremy is deeply in love with Jasmine. Jasmine lives where cell phone coverage is poor, so he can either call
her on the land-line phone for five cents per minute or he can drive to see her, at a round-trip cost of $2 in gasoline
money. He has a total of $10 per week to spend on staying in touch. To make his preferred choice, Jeremy uses a
handy utilimometer that measures his total utility from personal visits and from phone minutes. Using the values in
Table 6.6, figure out the points on Jeremy’s consumption choice budget constraint (it may be helpful to do a sketch)
and identify his utility-maximizing point

Round Trips
Total Utility
Phone Minutes
Total Utility
80
20
200
150
40
380
210
60
540
260
80
680
300
100
800
330
120
900
7
200
140
980
8.
180
160
1040
160
180
1080
10
140
200
1100
Table 6.6
1.
2.
st
LO

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