Consider a town that has many firms that provide landscaping services. All firms provide the exact same service with no differences in quality, speed, or any other characteristic, and there are no barriers to entry. The market demand is given by P = 150 - Q where P is the price of the landscaping services per unit of land and Q is the units of land. The marginal cost of landscaping services is $10 per land unit.

a. What market structure is implied by the description above?

b. Suppose that the city council of this town passes an ordinance that residents must use the services of just one landscaping firm. What is the new market structure? State the profit-maximizing condition for this firm and calculate the equilibrium price and quantity, firm profit, and consumer surplus for the new market. Show all work.

Return to the single landscaping firm from partbof the previous question. This firm now realizes that its market is made of residential (R) and commercial (C) customers. It segments the market according to the following demands that are representative of each consumer type:

PR=100-QRPC=200-QC

Marginal cost is still $10. It can identify the consumer types before the point of sale.

a. i. The landscaping firm plans to charge a profit-maximizing per-unit price to each market segment. Calculate the prices, quantities, and total profit resulting from this strategy.

ii. What should be the relationship between the consumers' elasticities of demand and the prices

you found in parta? Verify the mathematical relationship that supports your answer.

b. i. Still able to separate and identify the consumer types as residential and commercial, the single landscaping firm now wants to sell a fixed quantity of landscaping jobs for a single lump-sum price to each consumer type. What will be the lump-sum prices, fixed quantities, and total profit resulting from this strategy? Show all work.

ii. Suppose that a section of the city ordinance states that the landscaping firm cannot force different prices on different consumers, but must always offer a menu of prices from which the different consumers can choose. Show that if the landscaping firm offered the options that you found in partb, then the commercial consumers would choose the package intended for the residential consumers.

iii. Makeanadjustmenttothepricingoptionsfrompartbthatwouldavoidtheswitchingproblem. Assume that any adjustment includes an extra $1,000 "giveback" where appropriate. What would be the total profit from this strategy?

c. Rank the profits from the strategies of #1b, #2a, and both strategies of #2b. What explains the differences in profits?