Exercise 8: Price discrimination Consider now a similar setting as the one from the previous exercise, nut suppose now that there are N] consumers of type 31 and N2 consumers of type 92. Preferemzes are the same as before and E, = 10,192 = 15, c = 2. The monopolist can distinguish between types but it cannot distinguish between consumers that belong to the same type. Therefore, the monopolist has to care for two separate groups of consumers. Let's assume that the monopolist has a cost function C(Q} = .5112 where Q = q1 + qg. a] [3 points] Begin by deriving the demand function for each group [this is extremely easy] Econ 4631Industria1 lI'Cil'rganisation HW 3 h] [3 points] Once you have each group's demand function, set up the firm's maximization problem and find the optimal choices of output for each group, of and :13. c] [3 points] Assume c = 4 and N1 = N2 = 1 what are the optimal prices? 1ii'lihat are the firm's prots? d] [3 points} Calculate [net] cuIISumer surplus for groups one and two. Conclude this exercise by com puting aggregate welfare [total surplus]