Answer / Explanation:
To properly answer this question, we will first define some key terms which includes:
Surplus: This can be refereed to as an amount exceeding a particular requirement after it has been met.
Demand: This can be refereed to as the quantity of goods and serves a consumer or an individual is willing and pay for per time.
Now that we understand the basic concept above, we now refer back to the narrative of the question to try and answer t hem.
(a) With Provider A, the cost of an extra minute is $0. With Provider B, the cost of an extra minute is $1.
(b) With Provider A, my friend will purchase 150 minutes [= 150 – (50)(0)]. With Provider B, my friend would purchase 100 minutes [= 150 – (50)(1)].
(c) With Provider A, she would pay $120. With Provider B, he would pay $100.
(d) The figure below shows the friend’s demand. With Provider A, she buys 150 minutes and her consumer surplus is equal to (1/2)(3)(150) – 120 = 105. With Provider B, her consumer surplus is equal to (1/2)(2)(100) = 100
(e) I would recommend Provider A because she receives greater consumer surplus when buying from that provider.
