2. Consider the First and Second degree price discrimination model discussed in class. In the case of the Second Degree Price Discrimination example, if the number of units in Option H is fixed at 12, what is the profitmaximizing number of discrete units in the Option L package? Explain. Second Degree Price Discrimination Suppose now (a) the monopolist cannot distinguish between the two consumers (b) the monopolist can prevent consumers from reselling the product between them (no arbitrage) The monopolist posts a menu of offers. Each consumer can pick any of the two options. ( lack customer allowed only one of each oftion ) Assume: a consumer picks the option that gives them a higher net surplus (=WTP-payment). Net Net Suppose the menu is Surplus Surplus for L tion for H either Option L: Buy a package, containing 8 units, for a total payment of $32. 32- 32 64-32 type can bony either of? Option H: Buy a package, containing 12 units, for a total payment of $72. ZZ-26 24-28 How many of each package are sold? Option L x 2 What are the monopolist's profits? $64 net surplus 12 of H from butting both buying ofation L demand curves on same $32 graph $ 32 $8 Note: area of a parallelogram = base x height height base