I. A monthly fee of $20 plus 5 cents per ca… Show more A l

Homework Assistance Economics I. A monthly fee of $20 plus 5 cents per ca… Show more A l

Economics

I. A monthly fee of $20 plus 5 cents per ca… Show more A l

I. A monthly fee of $20 plus 5 cents per ca… Show more A local telephone company offers three pricing options: I. A monthly fee of $20 plus 5 cents per call II. No monthly fee, but 10 cents per call. III. No monthly fee, and 20 cents per call for up to 100 calls, and 5 cents per call for any calls beyond the first 100. Note that the person can avoid the $20 monthly fee in option I by deciding to make no calls and discontinuing phone service. Hence, the first call under option I costs $20.05 ($20 for service plus 5 cents for the call). Assume that an individual consumes two goods: telephone calls and “All Other Goods,” with All Other Goods measured in monetary units at $1 per unit. Income is $100. a) Show graphically that a person might choose more calls under option II than option I, even though the per-call charge is higher in option II. b) Show graphically that a person might spend less money on phone service and make more phone calls under option II than option I. d) Which of the three options would be preferred by the consumer? Explain. If someone could answer these it would be greatly appreciated! Thank you so much! • Show less

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