Company XZC sells its Lenex Brand to four different segmentsA, B, C, and D. The variable cost for Lenex is $15. The size of each segment is 1000 people. The reservation prices for the segments are:

A $50

B $40

C $30

D $20

1. Assuming the XZC cannot use price discrimination, at what price should it sell Lenex to maximize its profits? How much would the profits be?

2. If Lenex could use price discrimination, how much would the profits rise? What would be the practical difficulty in implementing it?

3. Assume that the government wants everyone to be able to afford Lenex. It offers XZC a subsidy of $20,000 if XZC sells Lenex to all 4000 potential customers. Should XZC accept this offer? (Hint: XZC is trying to maximize its profits and in this case cannot use price discrimination.)

4. Assume that the government wants everyone to be able to afford Lenex. It offers XZC a subsidy of $7 per unit sold if XZC sells Lenex to all 4000 potential customers. Should XZC accept this offer? (Hint: XZC is trying to maximize its profits and in this case cannot use price discrimination.)