Your local telephone company has offered you a choice between the following billing plans:

Plan A: Pay $0.05 per call.

Plan B: Pay an initial $2/wk, which allows you up to 30 calls per week at no charge.

Any calls over 30/wk cost $0.05 per call.

If your income is $12/wk and the composite good costs $1, graph your budget constraints for the composite good and calls under the two plans.

*Problems marked with an asterisk (*) are more difficult.

*23. At your school’s fund-raising picnic, you pay for soft drinks with tickets purchased in advance—one ticket per bottle of soft drink. Tickets are available in sets of three types:

Small: $3 for 3 tickets Medium: $4 for 5 tickets Large: $5 for 8 tickets If the total amount you have to spend is $12 and fractional sets of tickets cannot be bought, graph your budget constraint for soft drinks and the composite good

*24. Consider two Italian restaurants located in identical towns 200 miles apart. The restaurants are identical in every respect but their tipping policies. At one, there is a flat $15 service charge, but no other tips are accepted. At the other, a 15 percent tip is added to the bill. The average food bill at the first restaurant, exclusive of the service charge, is $100.
How, if at all, do you expect the amount of food eaten in the two restaurants to differ?
*25. Mr. R. Plane, a retired college administrator, consumes only grapes and the composite good Y(PY $1). His income consists of $10,000/yr from social security, plus the proceeds from whatever he sells of the 2000 bushels of grapes he harvests annually from his vineyard. Last year, grapes sold for $2/bushel, and Plane consumed all 2000 bushels of his grapes in addition to 10,000 units of Y. This year the price of grapes is $3/bushel, while PY remains $1. If his indifference curves have the conventional shape, will this year’s consumption of grapes be greater than, smaller than, or the same as last year’s? Will this year’s consumption of Y be greater than, smaller than, or the same as last year’s? Explain.