A friend of yours is considering two mobile phone providers. 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

– 50P, 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 with each provider would your friend talk on the phone?

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

d How much consumer surplus would she obtain with each provider? (Hint: Graph the demand curve and recall the formula for the area of a triangle.)

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