9. (2 points) The next two questions form a package. Consider a monopolist with the ability to produce at different quality levels. A unit of quality s has a unit cost of production c(s) 4s. Let the revenue earned by the monopolist be denoted by R. The utility an individual obtains from consuming one unit of the good is equal to Os. If the individual does not consume the good, he/she obtains a utility of zero. The parameter indicates the consumer type. There are two types of consumers. With probability the individual is of the type OL; with probability 1-3 the individual is of the type 0. Let OH > OL > 0. Suppose the seller can observe consumer types. Derive the optimal pricing of the monopolist and the optimal quality levels. A. SH = OH/8, SL=0L/8 B. SH = 0H/6, 8L = 0/6 == C. SH = OH/4, SL=0L/4 D. SH = OH/2, SL=0L/2 10. (6 points) Suppose now the monopolist cannot observe consumer types. Derive the optimal pricing of the monopolist and the optimal quality levels assuming the market participation of both consumer types. Page 3 A. SH = (OH+ B. SH=0H/8, 8L = C. SH = (OH+ D. SH OH/4, SL = = (OH-OL) 8L= =0L/8 (OL + 17 (OL - OH)) (OH - OL)), 8L = (OL + (OL OH)) (OL + 1 (OL - OH))