1. Suppose currently e = -9/8 and the firm produces at a marginal cost of $1. (a) 6 points What is the profit maximizing price per unit? (b) 3 points What effect do we expect on lel overtime if rivals enter the market? 2. Consider the following monopolist facing two different segments of demand. The first group of demanders is representable by: P = 2(1 -Q) and the second by: P = 1 -Q. Assume the marginal costs to serve each group is the same, zero, and there are no fixed costs. (a) 6 points If the monopoly is unable to treat the two groups as separate, find the profit maximizing price and quantity, find maximal profits. (b) 6 points If the monopoly is able to practice third degree price discrimination, find the profit maximizing prices and quantities, and find maximal profits.3. You have the option to produce different versions of a product or service: high quality or low quality. The marginal cost to produce the low quality version is $5 and the marginal cost to produce the high quality version is $25. There are two types of consumers Type A and Type B with 100 consumers of each type. Each consumer will buy at most one version of the product. These consumers have the following willingness to pay: Low Quality High Quality Customer Type A $40 $120 Customer Type B $25 $50 (a) 5 points Suppose you were to offer only the low quality version. Find the optimal price and profit. (b) 6 points Suppose you were to only offer the high quality version. Find the optimal price and profit. (c) 8 points Suppose you offer both versions. Find the optimal price and profit