Toby Talkalot subscribes to a local phone service that charges a fixed fee of $10 per month and allows him to place as many local phone calls as he likes without further charge.Let good 1 be an aggregate of commodities other than local phone use and let good 2 be local phone use.(Measure good 1 on the horizontal axis and good 2 on the vertical axis.)On Monday, Toby didn't use the telephone at all.The slope m of his indifference curve at the consumption bundle he chose on Monday was
A)positive.
B)less than or equal to 0.
C)0.
D)greater than or equal to 0.
E)negative.

Question

Quizplus · Accepted Answer

When Toby didn't use the telephone at all on Monday, his consumption bundle had zero units of good 2 (local phone use) and some positive quantity of good 1. At this point, the slope of his indifference curve would be 0 because no matter how much he increases his consumption of good 1 (and moves to the right along the horizontal axis), he still gets the same level of utility since his consumption of good 2 is zero. Therefore, the slope is equal to the change in utility (which is 0) divided by the change in good 1 (which is positive). Mathematically, this gives us a slope of 0.

Toby Talkalot Subscribes to a Local Phone Service That Charges