Problem 3: Menu Pricing.There are two types of fans of Kansas City Chiefs games: Enthusiastic (E) and Unenthusiastic (U). Each Enthusiastic fan has a representative demand curve given byPE= 1205QE, and each Unenthusiastic fan has a representative demand curve given byPU= 1208QU. The marginal cost of ticket production is constant atMC= 40 for all consumers.

1. Suppose the Chiefscan perfectly distinguishbetween two types of fans and charges a two-part tariff for each type.

1. a)What fixed fee and per unit price will they choose for Enthusiastic fans? For Unethusiastic fans?
2. b)What is the consumer surplus for each type of consumer?
3. c)What are the profits for the Chiefs from each type of consumer?

2. Suppose instead that the Chiefscan't distinguishbetween two types of fans. Instead of setting a single constant price per game, the Chiefs engages in menu pricing.

a)What are the optimal ticket packages (menu pricing) set by the Chiefs?b)What is the consumer surplus of each type of consumer?

c)What are the profits for the Chiefs from each type of consumer?