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Question 3. [10 points] Suppose Wilwaukee Telecom offers its users the option of paying either (a) $2.00 per minute for telephone service or (b) a
Question 3. [10 points] Suppose Wilwaukee Telecom offers its users the option of paying either (a) $2.00 per minute for telephone service or (b) a $225 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).
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