how do I answer this?
[50 points] Sir Toppem Hat's Rail is the only train line operating between the coastal towns of St. Thomas and Percy. Forty (40) percent of Toppem Hat's potential customers are business passengers, who need certain train service features and are willing to pay a substantial premium for them. The other sixty (60) percent are casual passengers, who do not require these additional services. Toppem Hat's can offer seating in two types of train car to its passengers: rst-class or economy. The table below describes the willingness to pay for each category of seating by each type of passenger. The table also presents the marginal costs of each type of seat for Toppem Hat's. Throughout this question, assume that Toppem Hat's can offer as many seats of each type as it wants. All gures are in dollars. Willingness to pay Car Type Costs Casual Business First-class 50 60 100 Economy 20 40 50 Each type of passenger calculates the net payoff (benets minus price) that she would get from a seat in each type of train car and buys the one that would give the higher net payoff, provided that this payoff is non-negative. If both types of car give equal, nonnegative net payoffs for a passenger, she buys rst-class; if both types of car have strictly negative net payoff for a passenger, she does not buy either of them. Assume that Sir Toppem Hat wants to maximize his expected prots. Suppose now that the quality of travel on Sir Toppem Hat's economy cars can be altered. Specifically, for a small additional cost, the rail line can prevent economy passengers from accessing its train-wide wireless internet networks. This has a significant negative effect on the value of economy travel for business travelers, who desperately need to send emails while riding the train, but little effect oncasual travelers, who usually sleep through the ride anyway. More specifically, suppose taking this action would change the above table to the following: Car Type Costs Willingness to pay Casual Business First-class 50 60 100 Economy 22 38 40 (e) [7 points] Without reference to the numbers provided, why might such a move in theory be beneficial to Sir Toppem Hat's? In particular, which constraint from part (b) is now easier to satisfy? (f) [8 points] Calculate the new optimal pricing scheme and profits if Sir Toppem Hat's offers seats in both types of car with these costs and willingnesses to pay. Will the rail line pursue this strategy rather than allowing all customers to use wireless internet? (g) [7 points] How would consumer surplus be changed by this new scheme
