Q1.1. (6 points) Consider four users: Anna, Ben, Charlie, and Dana. In the next month, they will consume 5, 25, 50, and 70 GB, respectively. Now, suppose the ISP has decided that the supply cost is $8/GB. If the ISP wants to recover its cost, what will it charge each user (in dollars) under a purely flat-rate scheme? How about a purely usage-based scheme? Q1.2. (29 points) Suppose a user’s linear data demand curve is described in the following. At a price of $0/GB, the user would consume 60 GB each month, and at a price of $30/GB, the user would not consume anything. Assume that the supply cost of the provider is $15/GB. Answer the following questions: •
Q1.2.1. (5 points) Plot the demand curve. •
Q1.2.2. (12 points) Consider the flat-rate pricing scheme and calculate the user consumption (in GB), utility, and surplus. •
Q1.2.3. (12 points) Consider the usage-based pricing scheme and calculate the user consumption (in GB), utility, and surplus.