You are the pricing manager of a car dealership. Through your vast experience of being a pricing manager, you know that there are 3 different kinds of customers with different willingness to pay for the following:

Customer 4 Wheel Drive Leather Seats

A $5,000 $2,000

B $3,000 $1,500

C $500 $3,000

For simplicity, assume that the firms costs are $0.

1. (25 pts) Suppose the pricing manager immediately knows the willingness to pay of each customer as soon as the customer walks into the door of the dealership. What is the optimal pricing strategy? How much profits will be made and what is the consumer surplus? Show your calculations.
2. (50 pts) Suppose the manager does not know each customers willingness to pay. The manager decides to sell 4 Wheel Drive by itself for $3,000 each, leather seats by itself for $3,000 each but offers a special package/bundle (4 Wheel Drive AND leather seats) for $4,000.

a. Which customers will buy the individual options for $3,000 each and which customers will buy the special package/bundle for $4,000? Explain why.

b. Given your answer above, how much profits will be made and what is consumer surplus? Show your calculations.