Suppose that there are 1,000 customers uniformly distributed along the 10km of Egham High Street. Egham Thai, a truly delicious Thai restaurant, is the monopoly provider of Thai food in the area and is located smack back in the middle of Egham High Street (i.e., at the 5km point). Each consumer derives a value of50 from a meal from Egham Thai and buys at most 1 meal per month. Since there is a pandemic, Egham Thai can only do take away. For each consumer, transport costs are2 per kilometre (round trip). Egham Thai's marginal cost of supplying a dinner is,c=10. There are no fixed costs at this location.

1. (a)3 marks What price per meal with Egham Thai set if it serves the entire market?
2. (b)2 marks What are Egham Thai's monthly profits at this price?

Now suppose that a space for rent has opened at the 0km point of Egham High Street. The rent for this space is500 per month. Egham Thai can not move its original store to a new location, but it can open a second restaurant. The new restaurant will have the same marginal production cost as the original restaurant (c=10). The two locations can set different prices per meal ofpoandpnwhere 'o' stands for 'original' and 'n' stands for 'new'.

(c)5 marks Give a formula for the marginal consumer who is just indifferent between buying from the new restaurant (at the 0km point) and the original restaurant (at the 5km point).

(d)15 marks Suppose that Egham Thai fixes the price of the original restaurant (at the 5km point) at the price that serves the entire market. Find the profit maximising price for the new restaurant.

(e)5 marks Suppose Egham Thai allowed the original store (at the 5km point) to choose any price (not necessarily such that the entire market is served). Without doing any calculations, would you expect the prices at each restaurant to increase, decrease or stay the same compared to part (d)?

Explain your reasoning in no more than 5 short sentences.