Answer
a) Provider A has no cost for an additional minute, while Provider B has an additional cost of 1 dollar.
b) Provider A would have 150 minutes, while Provider B would have 100 minutes.
c) Provider A would cost 120 dollars, while Provider B would cost 100 dollars.
d) Provider A would have consumer surplus of 105 dollars, and Provider B would have consumer surplus of 100 dollars.
e) Provider A would be recommended since there is more consumer surplus with that provider.
Work Step by Step
a) Provider A charges a flat fee per month, while Provider B charges per minute.
b)
$Q^{D} = 150-50*P$
If $P=0$, then
$Q^{D} = 150-50*0$
$Q^{D} = 150-0$
$Q^{D} = 150$
If $P=1$, then
$Q^{D} = 150-50*1$
$Q^{D} = 150-50$
$Q^{D} = 100$
d)
Provider A surplus:
$(1/2)*(3)*150-120$
$3/2*150-120$
$225-120$
$105$
Provider B surplus:
$(1/2)*2*100$
$1/2*2*100$
$2/2*100$
$1*100$
$100$
