I’m working on a economics test / quiz prep and need an explanation to help me learn.
Question 1. [40 points] Suppose Michcongan Telecom offers its users the option of paying either (a) $2.00 per minute for telephone service or (b) a $125 flat charge for a year of unlimited toll-free calls. Consider a customer with an annual demand for telephone service of P = 11 0.1Q, where P is the price per minute and Q is the number of minutes of calls made per year. Calculate the consumer surplus for each of the plans (a) and (b).
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