Concept explainers
A consumer is trying to decide between two long-distance calling plans. The first one charges a flat rate of10¢ per minute, whereas the second charges a flat rate of 99¢ for calls up to 20 minutes in duration and then 10¢ for each additional minute exceeding 20 (assume that calls lasting a noninteger number of minutes are charged proportionately to a whole-minute’s charge). Suppose the consumer’s distribution of call duration is exponential with parameter λ
a. Explain intuitively how the choice of calling plan should depend on what the expected call duration is.
b. Which plan is better if expected call duration is10 minutes? 15 minutes? [Hint: Let h1(x) denote the cost for the first plan when call duration is x minutes and let h2(x) be the cost function for the second plan. Give expressions for these two cost
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Chapter 4 Solutions
Probability and Statistics for Engineering and the Sciences
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