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A sand and gravel company sells pea gravel. It faces two types of customers with the following inverse demand curves: TypeA: P = 3.5 -
A sand and gravel company sells pea gravel. It faces two types of customers with the following inverse demand curves:
TypeA: P = 3.5 - 0.002Q
TypeB: P = 3 - 0.001Q
where Q measures bags of pea gravel and P is the price per bag. The marginal cost is $0.50 per bag. Suppose the business wants to use discounting to price discriminate.
- The consumer surplus for Type B consumers with the regular price (no price discount) is $____.
- The consumer surplus for Type B consumers with the price discount is $____.
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