Emma likes to call her friend regularly during the month, but he lives abroad. A call costs him $5/minute. The psychological benefit (measured in dollars) of the first 100 minutes of call is $10/minute, that of the next 100 minutes, $5/minute, that of the next 100 minutes, $2.5/minute and finally, that of the next 100 minutes, also $2.5/minute. A) If Emma calls her friend 100 minutes a month does she

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Chapter1: Making Economics Decisions
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Case No. 1
Emma likes to call her friend regularly during the month, but
he lives abroad. A call costs him $5/minute. The
psychological benefit (measured in dollars) of the first 100
minutes of call is $10/minute, that of the next 100 minutes,
$5/minute, that of the next 100 minutes, $2.5/minute and
finally, that of the next 100 minutes, also $2.5/minute.
A) If Emma calls her friend 100 minutes a month, does she
make a net gain?
B) What is the number of call minutes per month that
maximizes Emma's satisfaction?
C) If we use Emma's monetary measure of satisfaction,
what is the amount of her satisfaction?
D) What should be the price per minute of a call for Emma
to be at the maximum satisfaction by choosing to call 400
minutes per month?
Transcribed Image Text:Case No. 1 Emma likes to call her friend regularly during the month, but he lives abroad. A call costs him $5/minute. The psychological benefit (measured in dollars) of the first 100 minutes of call is $10/minute, that of the next 100 minutes, $5/minute, that of the next 100 minutes, $2.5/minute and finally, that of the next 100 minutes, also $2.5/minute. A) If Emma calls her friend 100 minutes a month, does she make a net gain? B) What is the number of call minutes per month that maximizes Emma's satisfaction? C) If we use Emma's monetary measure of satisfaction, what is the amount of her satisfaction? D) What should be the price per minute of a call for Emma to be at the maximum satisfaction by choosing to call 400 minutes per month?
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