Self-Check Question | Chapter 6

Go to section 6.1 and solve the following exercise based on the textbook example.

1. 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 the table below, figure out the

following:

a) the points on Jeremy's consumption choice budget constraint (it may be helpful to make

sketch); and,

b) identify his utility-maximizing point by using the Total Utility Method.

c) Use the marginal utility approach to confirm the choice of phone minutes and round trips

that maximize Jeremy's utility.