Consider an imperfectly competitive service provider, Muscat Automotive Repair Services (MARS), whose total cost of production is = +

. . Also, MARS faces two different market segments, A and B, whose demands can be linearly expressed as= and= . . (Hint: the marginal cost is the slope of the total cost function).

1. Under a single-price strategy (no market segmentation), find MARS's profit-maximizing price and quantity.
2. Under a single-price strategy (no market segmentation), find the consumer surplus.
3. Draw the situation described in (1) and (2) above, clearly showing the profit-maximizing price and quantity and the area that represents the consumer surplus.
4. If MARS decides to segment the market in accordance with the demands of groups A and B, find the profit-maximizing prices and quantities (,) and (,).
5. What is the value of the consumer surplus for each group A and B, under this segmentation strategy?
6. Draw the situation described in (4) and (5) above, clearly showing each group's profit- maximizing price and quantity, and the areas that correspond to their consumer surpluses.
7. Verify the inverse elasticity rule under each of the scenarios described (1) and (4) above.