ECON 115-5th Problem 2nd Degree Price Discrimination Problem Suppose there are 100 wealthy consumers, who value the 1" unit of a good at $15 and a 2nd unit at $10. There are also 100 moderate income consumers, who value only the 1" unit at $12. For the producer, AC = MC = 6. There are no fixed costs. 1. No price discrimination. One unit sells for $15. 2. No price discrimination. One unit sells for $12. a. What is the total revenue? a. What is the total revenue? b. What is the total cost? b. What is the total cost? c. What is the producer surplus (profit)? c. What is the producer surplus (profit)? d. What is the consumer surplus? d. What is the consumer surplus? e. What is the total surplus? e. What is the total surplus? 3. No price discrimination. One unit sells for $10. 4.2nd Degree Price Discrimination: a. What is the total revenue? Package A: 1 Unit for $12. Package B: 2 Units for $20 b. What is the total cost? c. What is the producer surplus (profit)? a. What is the total revenue? d. What is the consumer surplus? b. What is the total cost? e. What is the total surplus? c. What is the producer surplus (profit)? d. What is the consumer surplus? e. What is the total surplus? 5. The total surpluses in 3 and 4 are equal. Why does the producer offer a quantity discount? 6. What is the per unit savings created by the quantity discount offered in Package B? BONUS: What do wealthy consumers do if the producer offers Package B at $25?