4. Refer to problem 3. Suppose now that all such monopolies can perfectly pricediscriminate. LO2, LO5

a. Will the franchise be sold, and if so, how much will it sell for? Is this outcome socially efficient? Explain.

b. The town council decides that, rather than auction off the franchise, it will give it away to the firm that spends the most money lobbying council members. If there are four identical firms in the bidding and they cannot collude, what will happen?