Post-merger T-Mobile/Sprint is developing new data plans targeted to certain regions of the country. Using billing records for customers in the west coast (CA-OR-WA) region, the priong team has determined that typical data usage can be estimated with the following demand: Q 1600-100P (where P is in cents per MB; and Q is in MB) And the pricing team has proposed the following charges: First 400 MB @ 5¢ Next 200 MB @ 3¢ Remaining MB @ 14 What will be the consumer surplus generated by the typical west coast customer, given this pricing schedule, if the customer uses marginal decision-making? If west coast consumers choose quantity based on the average price per MB, will quantity increase or decrease relative to marginal decision making? a) CS with marginal decision making: $92.50; using average price leads to consuming less than the optimal amount.
