8. Refer back to Problem 7 and answer the following questions. (LO5, LO6)

a. Suppose George is permitted to charge two prices. He knows that customers with a reservation price above $30 never bother with coupons, whereas those with a reservation price of $30 or less always use them. At what level should George set the list price of a portrait? At what level should he set the discount price? How many photo portraits will he sell at each price?

b. In this case, what is George’s economic profit and how much consumer surplus is generated each day?