A restaurant has three types of customers. A third of its customers, Type A, are willing to spend $5 on an appetizer but only $2 on a desert. Another third, Type B, are willing to spend $4 on an appetizer and $3 on a dessert. The remaining third, Type C, are willing to spend only $2 on an appetizer but $6 on a dessert. It costs the restaurant a constant $2 to prepare an appetizer or a dessert.

i.(5%) Which is the optimum pricing strategy for the restaurant if it can perfectly price discriminate? What will be the restaurants profit and social welfare in this case? ii.(5%) What will be the profit maximizing flexible bundling strategy when the restaurant offers appetizers and desserts separately and in a bundle? How much profit would the restaurant earn from this flexible bundling strategy? How big is social welfare in this case?