The Cleveland Browns can produce seats of any quality z such that 0 z 40. There are no costs to production regardless of quality. There are NL of type L consumers and NH = 7500 of type H consumers. Type L consumers have utility: VL = 3z p and type H consumers have utility:

VH = 5(z 10) p

The Browns cannot distinguish between type L and type H consumers.

a) If NL = 7500, will the Browns produce one quality seat for all consumers or two quality seats?

b) For what range of NL will the Browns produce one quality seat for all consumers? Briefly explain the basic intuition of your result.

c) If NL = 2500, what price and quality are chosen for each type of seat sold?