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Textbooks / Business / Principles of Economics 6 / Chapter 7 / Problem Problems and Applications 7.10

. A friend of yours is considering two cell phone service providers. Provider A charges

Principles of Economics | 6th Edition | ISBN: 9780538453059 | Authors: N. Gregory Mankiw ISBN: 9780538453059 472

Solution for problem Problems and Applications 7.10 Chapter 7

Principles of Economics | 6th Edition

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Principles of Economics | 6th Edition | ISBN: 9780538453059 | Authors: N. Gregory Mankiw

Principles of Economics | 6th Edition

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Problem Problems and Applications 7.10

. A friend of yours is considering two cell phone service 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 friends monthly demand for minutes of calling is given by the equation QD 5 150 2 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 would your friend talk on the phone with each provider? c. How much would he end up paying each provider every month? d. How much consumer surplus would he 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?

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Textbook: Principles of Economics
Edition: 6
Author: N. Gregory Mankiw
ISBN: 9780538453059

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. A friend of yours is considering two cell phone service providers. Provider A charges