A firm believes there are two types of customers: b and l. The inverse demand equation for a b customer is:

pb

= 130

– 2q The inverse demand equation for an l customer is:

pl

= 90

– 4q The marginal cost of producing their good is 10.

(a) The firm offers two quantities qb and ql such that the marginal cost is equal to the marginal willingness to pay of each type. Design the set of profit-maximizing second-degree price discriminating prices and calculate the profit earned per customer for each type.

(b) If the firm was to reduce the l quantity by five units, recalculate the prices and profit earned per customer for each type. Explain any difference to your answer in Exercise 7(a).