Self-Check Questions

are the same. Similarly, many people over withhold on their taxes, essentially giving the government a free loan until they file their tax returns, so that they are more likely to get money back than have to pay money on their taxes.

Self-Check Questions

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 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 0 0 0 0 1 80 20 200 2 150 40 380 3 210 60 540 4 260 80 680 5 300 100 800 6 330 120 900 7 200 140 980 8 180 160 1040 9 160 180 1080 10 140 200 1100 TABLE 6.6 2 . Take Jeremy’s total utility information in Exercise 6.1, and use the marginal utility approach to confirm the choice of phone minutes and round trips that maximize Jeremy’s utility. 3 . Explain all the reasons why a decrease in a product's price would lead to an increase in purchases. 4 . As a college student you work at a part-time job, but your parents also send you a monthly “allowance.” Suppose one month your parents forgot to send the check. Show graphically how your budget constraint is affected. Assuming you only buy normal goods, what would happen to your purchases of goods?

Review Questions

5 . Who determines how much utility an individual will receive from consuming a good? 6 . Would you expect total utility to rise or fall with additional consumption of a good? Why? 7 . Would you expect marginal utility to rise or fall with additional consumption of a good? Why? 8 . Is it possible for total utility to increase while marginal utility diminishes? Explain.