Econ question

4. Hardy Hurdley owns a clear spring. which produces mineral water that is viewed as having unique restorative properties. Hardy has no fixed costs. and the water is available at zero marginal cost. It is demanded by two groups, Group A and Group B. whose demand functions for the water take the following forms: 0 Group A: P = 20 20.4 0 Group B: P = 10 Qg where 0,-(r' = A, B) is in liters per period and P is in dollars per liter. (a) If Hardy sets a single price for the water. give the price he will charge, the quantity purchased by Group A and by Group B, Hardy's profits, and the consumer surplus of Group A and of Group B. (b) Hardy decides to charge two prices for the water. a "regular" price (PH). which involves no waiting. and a lower price (PL). which is available only after waiting one hour per liter purchased. Group A members assess the cost of the wait at $8/hour. while Group B members treat the waiting cost as zero. What prices would Hardy set if he knew the demand curves and the valuations of the cost of the wait? Calculate Hardy's profits and the consumer surplus of Group A and of Group B under this pricing scheme. (c) Suppose that PH and PL. are as in (b). but that now Group B members evaluate the waiting-time at a cost of SEE/hour. while Group A members treat the waiting cost as zero. Calculate Hardy's profits and the consumer surplus of Group A and of Group B in this situation