Use the two inverse demand curves and the marginal cost from Problem 1, but now imagine that the inverse demand curves capture the demand for representative consumers of two types: Tepid (T) and Spirited (S).

The two inverse demand curves from question 1 are as following:

Pt = 45 2Qt and Ps = 60 Qs.

MC is=5.

1. Suppose Arsenal can perfectly distinguish between two types of fans and charges a two-part tariff for each type.

a) What fixed fee and the per-unit price will they choose for Tepid fans? For Spirited fans?

b) What is the consumer surplus of Tepid fans? Of Spirited fans? From which fan type does Arsenal make higher profits? 2. Suppose instead that Arsenal can't distinguish between two types of fans. Instead of setting a single price per game, Arsenal engages in menu pricing.

a) What are the optimal ticket packages (menu pricing) set by Arsenal?

b) What is the consumer surplus of Tepid fans? Of Spirited fans? From which fan type does Arsenal make higher profits?