M3. [25 points] Scanio is an app that converts photos into scans. Consumers use it to convert photos of documents into clear, readable pdf les. Assume downward sloping Marginal Willingness to Pay (MWTP) for scans for all individuals. When the price per scan via the app is $0.1, Nico converts 50 photos into scans in a month. a) [7 points] Scanio changes its pricing structure. Now, the rst 25 scans are free and every scan after that costs $0.2 each. Claim: Nico spends the same amount on scans before and after the price change. Agree, Disagree or It depends? Explain your reasoning. A diagram is not an explanation. Your explanation needs to be sufcient without a diagram. Solution: Nico pays $5 under the original pricing scheme ($0.1*50). Nico chooses his quantity based on MWTP(Q) vs MC. His MC is zero for the rst 25 scans and $0.2 for the scans after. As he buys 50 scans when the price is $0.1 we know that he will buy more than 25 scans when the MC is zero. That means $0.2:MWTP will occur at a quantity less than 50. Thus, he will spend less than $5 (i.e. $0.2*25) under the new scheme