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 friend's monthly demand for minutes of calling is given by the equation QD=150−50P, where P is the price of a minute. How much consumer surplus would he obtain with each provider?

Provider A 225

Provider B 100

A would be the best option as provides with better surplus

Explanation:

P to make Qd = 0

150/50 = 3

Provider A

the surplus will be

Qd = 150 - 50P

IF there is a flat fee then, variable P will be 0 thus, our friend will do

Qd = 150 minutes

The surplus will be:

(3 - 0) x 150/2 = 225

Provider B

Qd = 150 - 50(1)

Qd = 150 - 50 = 100

It will make call for 100 minutes.

The surplus is:

(3 - 1) x 100/2 = 100

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