A friend of yours is considering two cell phone service providers. Provider A charges $100 per month for the service regardless of the number of phone calls made. Provider B does not have a fixed service fee but instead charges $1 per minute for calls. Your friend's monthly demand for minutes of calling is given by the equation QD=120−30PQD=120−30P, where PP is the price of a minute. With Provider A, the cost of an extra minute is ? With Provider B, the cost of an extra minute is ? Given your friend's demand for minutes and the cost of an extra minute with each provider, if your friend used Provider A, he would talk for ?? minutes, and if he used Provider B, he would talk for ?? minutes This means your friend would pay for service with Provider A and for service with Provider B. Use the following graph to draw your friend's demand curve for minutes. Then use the green triangle to help you answer the questions that follow. Your friend would obtain in consumer surplus with Provider A and in consumer surplus with Provider B. Given this information, which provider would you recommend that your friend choose? Provider A Provider B
A friend of yours is considering two cell phone service providers. Provider A charges $100 per month for the service regardless of the number of phone calls made. Provider B does not have a fixed service fee but instead charges $1 per minute for calls. Your friend's monthly
With Provider A, the cost of an extra minute is ?
With Provider B, the cost of an extra minute is ?
Given your friend's demand for minutes and the cost of an extra minute with each provider, if your friend used Provider A, he would talk for ?? minutes, and if he used Provider B, he would talk for ?? minutes
This means your friend would pay
for service with Provider A and
for service with Provider B.
Use the following graph to draw your friend's demand curve for minutes. Then use the green triangle to help you answer the questions that follow.
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