16, Dec 2020
Calculate the consumer surplus

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)