Bridget Jackson is getting ready to open a small restaurant. She is on a tight budget and

Question:

Bridget Jackson is getting ready to open a small restaurant. She is on a tight budget and must choose between the following long-distance phone plans:

Plan A: Pay 8 cents per minute of long-distance calling.

Plan B: Pay a fixed monthly fee of $17 for up to 320 long-distance minutes, and 6 cents per minute thereafter (if she uses fewer than 320 minutes in any month, she still pays $17 for the month).

Plan C: Pay a fixed monthly fee of $21 for up to 500 long-distance minutes and 4 cents per minute thereafter (if she uses fewer than 500 minutes, she still pays $21 for the month).


Requirements:

a. Draw a graph of the total monthly costs of the three plans for different levels of monthly long-distance calling. Your graph should resemble some combination of those in Panels A and B in Exhibit 2-3.

Exhibit 2-3 Graphs of Variable and Fixed Costs:

PANEL A: Variable Cost of Steering Wheels at $600 per BMW X6 Assembled PANEL B: Supervision Costs for the BMW X6 assembl

b. Which plan should Jackson choose if she expects to make 100 minutes of long-distance calls? 320 minutes? 520 minutes?

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