Problem 1 In a new effort to extract even more money from students, Emory has decided to charge a fare for riding its Cliff Shuttles. Emory bans other entities from providing bus service on its campus. Due to budget shortfalls, Emory wants to make as much money as possible on its Cliff Shuttle service. It is not possible for Emory to interview every potential bus rider their willingness -to-pay for riding the Cliff Shuttle. Instead, Emory has estimated demand for faculty and for students. The number of shuttle trips demanded by faculty (q1) and students (42) are given by = 10 - P1 92 = 20 - 4p2 The marginal cost of an additional trip is 4. (a) Suppose that Emory decides to charge faculty and students different prices. Which type of price discrimination is Emory engaging in? (b) How much should Emory charge faculty and students to ride the Cliff Shuttles? What will the daily ridership be for faculty and for students? (c) How much profit will Emory earn? What is consumer surplus at the profit-maximizing prices? What would consumer surplus be at competitive prices? (d) Are faculty or students charged more? What are their price elasticities of demand? Who has more elastic demand? Why are those with more elastic demand charged less? (e) What is the markup for faculty and for students? Who has a higher markup? (f) What is the deadweight loss under the profit-maximizing prices? What would the deadweight loss be at competitive prices? (g) Suppose now that poorly compensated junior faculty revolt and demand that Emory not discriminate against faculty. What price will Emory charge if it has to charge the same price to both faculty and students? What will its profit be? (h) Analyze your results. Does price discrimination increase or decrease social welfare compared to requir- ing Emory to charge a single price p?(i) Should monopolists always be allowed to price discriminate? Explain. (j) Suppose Emory underestimated student demand for Cliff Shuttles. Their demand is actually q2 = 20 - 2p2. Will Emory price discriminate? Justify your