Two-part Tariff A bar produces a good (think of it like beer and all other related

services) with a constant marginal cost of $5 per unit. Assume for now that all

consumers have the same demand Q = 10 P and there are 100 students.

a) Suppose that the bar cannot price discriminate and has to charge the same price P for the good. Calculate the price that maximizes profits and the number of profits.

b) Suppose now that the bar can charge a two-part tariff (T, P), where T is the cover (entrance fee) and P is the price per unit, i.e. a student that goes in the bar spends T + P Q. Calculate the two-part tariff that maximizes profits and the number of profits. Why are P and P different?

c) Assume now instead of that there are two types of students. Type 1 students have

demand Q1 = 10 P and type 2 students have demand Q2 = 10 P 2. The population is still 100 and there are 50 of each type. Calculate the two-part tariff that maximizes the

profits of the monopolist. Why is the pricing arrangement different from the one you

have calculated in b)?