1. (15 points) There are a number of Internet services, such as live streaming videos, that use a great deal of bandwidth. Consider an Internet service provider that currently charges a fixed up-front monthly fee with unlimited usage (unlimited data uploading and downloading). Consider one consumer, Oliver, whose monthly demand for Internet usage is:
2. Q=160.5P or P =322Q
3. where Q is the number of gigabytes used per month and P is the incremental price per gigabyte, in
4. dollars. Oliver currently pays a fixed monthly fee of $80 for unlimited Internet access.
5. Oliver's Internet service provider (ISP) is looking for ways to ration the available bandwidth by in- troducing a plan that combines a lower fixed monthly fee with an additional per-gigabyte charge after a certain threshold. The new plan offered by Oliver's ISP consists of an up-front monthly fee of $45 with no additional charge for the first 10 gigabytes consumed per month, but additional usage above 10 gigabytes is charged a price of $2 per gigabyte.
6. (a)(6 points) If Oliver switches to the new plan offered by his ISP, how many gigabytes will he down- load? Show your work and illustrate your answer.
7. (b)(4 points) Calculate Oliver's consumer surplus under the new plan. Show your work. Illustrate your answer on your graph from part (a).
8. (c)(5 points) Based on his consumer surplus, would Oliver prefer the original plan or the new plan? Briefly explain your answer.