Consider a market with 100 individuals each with the demand schedule for electricity of P=10-Q. they are served by a electric utility with a constant marginal and average cost of 2.

a. Assuming zero costs of implementation. What is the two part tariff that a profit maximizing utility will set? What is the total profit and the total surplus in this market?

b. What is the total profit and total surplus if, instead of a two part tariff, the utility had to sell all its electricity at a single price per unit (with no other prices or charges)