Consider a local fast-food restaurant. The following table shows the maximum price that Alex and Anna will pay for 2 products: chicken nuggets and fries. Assume that the marginal cost of chicken nuggets is 1 and the marginal cost of fries is 0.50

Reservation prices forConsumer surplus fromProfit

Chicken FriesBundleChicken FriesBundle

Nuggets

Alex1.5023.50

Anna2.5013.70

a) Solve for profit if the restaurant engages in pure bundling.

b) Suppose the restaurant engages in mixed bundling. What is the profit maximizing bundle and individual good prices that maximize profit from mixed bundling? Compute the max profit from mixed bundling. Is it higher than profit from pure bundling?