Service regardless of the number of phone calls made

Assignment Help Business Economics

Reference no: EM138338

Q. A friend of yours is considering two providers of cell phone services. Provider A charges $120 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= 150 - 50 P, where P is the price of a minute.

a. With each provider, what is the cost to your friend of an extra minute on the phone?

b. In light of your answer to (a), how many minutes would your friend spend on the phone with each provider?

c. How much would he end up paying each provider every month?

d. How much consumer surplus would he obtain with each provider?

e. Which provider would you recommend that your friend choose? Why?

Reference no: EM138338

Questions Cloud

Why the government may still prefer : Then make an argument for why the government may still prefer using the other approach.

Coffee shop has changed its name : One day you arrive to discover that the coffee shop has changed its name to Five bucks and is now charging $5 per cup.

Important role in demand : We know tastes and preferences play an important role in demand. Do you think of any possible future "popular product".

Explain the managerial actions : Discuss the difference between them and explain the managerial actions that can influence the firm profitability.

Service regardless of the number of phone calls made : Provider A charges $120 per month for the service regardless of the number of phone calls made.

Economy specialized in its comparative advantage : If each economy specialized in its comparative advantage, what range of prices would bacon trade at in terms of eggs.

Consumer surplus be affected : An equal number of consumers who have a willingness to pay of $119 are allowed to buy the good at a price of $99. How will consumer surplus be affected.

Zero lower bound on the federal funds rate : Use this equation to explain the level of income at which there is a zero lower bound on the federal funds rate

Natural rate of unemployment : Where does the national unemployment rate stand relative to the Natural Rate of Unemployment

User Account

All Pages