2. Consider a closed economy with a single telephone company, Calls-R-Us. The residents of the country make 2 million phone calls per year and pay $3 per phone call. One day a new phone company, CheapCall, enters the market and charges only $2 per phone call. All of the residents immediately stop using Calls-R-Us and switch to CheapCall. They still make 2 million phone calls per year. The executives of CheapCall are proud of their market share.

Moreover, they post billboards stating, “Our country has increased its national saving by $2 million per year by switching to CheapCall.” Comment on the accuracy of the statement on the billboards.