Consider the following situation: A price discriminating monopolist with amarginal cost of $10 faces demands from two types of customers that are not distinguishable.A typical type 1 customerhas demand Q1=50PQ and a type 2 has Q2=90P.There are 10 customers of eachtype. The monopolist wants to use a two part tariff with possible per unit charges startingat marginal cost, and going up in increments of $10, to get the highest profit.

Complete the table below showing the profit implications of different possible two part tariffsthat the monopolist could use. Complete only as much as you need to find the best two parttariff from these choices, and then state the best choice.

Unit price	Fixed Fee for all customers	Profit margin times units sold for eachType 1 customer	Profit margin times units sold for each type 2 customer	Total Profits from all customers
10
20
30
40

The best two part tariff has a unit price of ________

Instead if he just sells to the Type 2 people his best two part tariff with have a unit price of _______

and a fixed fee of_______ . This gives him a profit of_______ .

The monopolist prefers to

		sell to both types.
		sell to Type 2 only.