2. Under second degree price discrimination, consumers are offered a menu of prices (or a pricing schedule) that is nonlinear, the price paid depends on the quantity bought. Pricing schema of this nature are employed in situations where firms know that consumers differ (say some consumers are high demand and some are low demand) but the firm is not able to identify a consumer's type. Address the following questions. a. Explain the conditions that must exist for a firm to price discriminate. b. Profit maximizing pricing schedules must satisfy two constraints, the participation constraint and the self-selection constraint. Discuss intuitively each of these constraints. c. The optimal pricing schedule will exhibit some distinct outcomes including: i. The high demand consumers will retain some of their surplus (their informational rent") and low demand consumers will retain no surplus. ii. High demand consumers pay a lower average price for the good (and conversely low demand consumers will pay a higher price per unit.) iii. In the pricing schedule structure, high demand consumers will purchase the surplus maximizing quantity but the quantity offered to low demand consumers will be less than socially optimal. Explain these outcomes making specific reference to the relevance of the constraints discussed in part b in explaining these results.