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. 1. 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?
2: 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: •
i. Plot the demand curve. •
ii. Consider the flat-rate pricing scheme and calculate the user consumption (in GB), utility, and surplus. •
iii. Consider the usage-based pricing scheme and calculate the user consumption (in GB), utility, and surplus.