Suppose the marginal cost of providing telephone services in a small town called Wilwaukee is zero. Wichigan Communications (WC) is the only provider of telephone services in Wilwaukee. WC charges a price (P) based on the number of phone calls (Q): $1.00 per call for the first 60 calls, 80 cents per call for the next 40 calls, and 50 cents per call for all remaining calls. The demand for phone calls by customers of WC is represented by P = 1.8 - 0.01Q.
Answer questions (a) and (b) below:
a) Calculate the magnitude of WC's producer surplus in Wilwaukee's telephone industry.
b) Calculate the deadweight loss in Wilwaukee's telephone industry.