Sarah consumes food and mobile phone minutes. Her utility function is U(W ,F) =W x F, where

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Sarah consumes food and mobile phone minutes. Her utility function is U(W ,F) =W x F, where W is mobile phone minutes and F is pounds of food per month. (Remember that for this utility function MUW = F and MUF =W.) Food costs $1 per pound. Her monthly income is $1,000. There is a single mobile phone company in the town where Sarah lives, Mobile Gab. Mobile Gab offers two plans: Plan A offers 500 free minutes for $300 per month; Plan B offers 2,000 free minutes for $800 per month. In both plans, additional mobile airtime costs $1 per minute. Draw Sarah's budget constraint. Which plan does she choose? How many mobile minutes and pounds of food does she purchase?
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Microeconomics

ISBN: 978-1118572276

5th edition

Authors: David Besanko, Ronald Braeutigam

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