Homework #3
Problem 1
Q
d
= 11
p
4
discrete, i.e assume that you can attend half an opera, etc.
that Fred is forced to attend these operas and pay for the tickets whether he
wants to or not. How much consumers surplus does Fred get from attending
all 5 operas? Graph this relationship. Depict the CS.
Problem 2
curve for minutes of cell phone usage is given by the following equation:
Q
d
= 750
3000
p
He is choosing between 3 di/erent cell phone plans.
Under plan A, he gets
1000 minutes a month for a fee of $60.
Each minute up to 1000 costs
nothing beyond the monthly fee. Under plan T, each minute of use costs
15 cents, but there is no monthly fee.
a.
Using CS, which plan should Tom choose?
b.
Suppose that Tom can also choose plan S. Under plan S, he gets 450 free
minutes for a monthly fee of $40. Each minute above 450 costs 11 cents.
1)
How many minutes will Tom use? Which plan should he choose?
2)
What if each minute above 450 costs 5 cents? How many minutes will Tom
use? What is his CS under this plan?
Equilibrium, price ceilings, and rationing.
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
This is the end of the preview.
Sign up
to
access the rest of the document.
 Fall '08
 GORDANIER
 Consumer Surplus, Supply And Demand, Tom, DWL, lowest cost producers

Click to edit the document details