Consider an airline that has a monopoly of a particular long-haul route. The airline divides the market into two well defined sub-markets, namely business people (business class) and tourists (economy class). The demand for business class travel is given by P=22500-0.50 and economy class travel is given by P=12500-0.1250. The total cost function for the airline on this route is given by TC - 50 000 000 + 0.1Q a) Draw the demand curve and the associated marginal revenue curves for the two individual sub-markets and the market as a whole on three sets of axes. Indicate all the important points. b) Calculate the number of flights offered and the prices charged in each market segment, as well as the total number of flights that will be offered by the airline if it practices third degree price discrimination. Show your calculations. c) Now assume the marginal cost of the airline is dependent on Q and is represented by MC = Q. The fixed cost remains at R50000000 for this question but variable cost will now change. [1 d) Is the equilibrium found in c) an improvement over the scenario when the firm is only able to offer the flights in only one market? Explain using calculations of your choosing. Further, assum that if they could only operate in one market that they would operate in the business class market. Are there welfare improvements when the firm can price discriminate? [5]