The Perch is a pub that has two types of potential customers: legal and underage drinkers.

It is illegal to allow entry to underage drinkers, but there is no way to perfectly identify

underage drinkers (fake IDs, etc.). Assume that Perch 's marginal cost is $3.00 per drink.

The drink demand for a representative customer in each of the two groups is given by:

PL= 6- QL (legal drinkers)

PU= 4 -QU (underage drinkers)

(1) If the price per drink is $3, how many drinks does each type of drinkers have?

(2) What is a pricing policy that will extract all of the profit from the legal drinkers?

(3) How many drinks do legal drinkers have under this pricing policy?

(4) Do underage drinkers have incentives to go to the bar under this pricing policy? Why?