A local Pilates studio recently began offering a monthly subscription service for its patrons.

Suppose a particular patron at this studio has the following willingness-to-pay schedule, per session.

Session Willingness to pay

1st $105

2nd $90

3rd $75

4th $60

5th $45

6th $30

Suppose this consumer would not demand any more sessions, even for free. Also assume that the marginal cost to the studio, per session, is constant at $15.

At a price of $82.50 per session, the number of sessions demanded by this consumer would be ?

At this price and quantity, consumer surplus is $?

and producer surplus is $?

Suppose the studio has devised a new pricing scheme for consumers who demand more than 1 session. This pricing scheme is a subscription service, whereby consumers can pay a flat fee of $303.75 and can have up to 6 sessions total.

Using this subscription pricing model, this consumer would demand

A. 2

B. 4

C. 3

D. 6

E. 5

Sessions

Under this scenario, consumer surplus is $?

and producer surplus is $?

(Hint: For consumer surplus, consider how much total value the consumer places on all sessions, versus the total price paid.)