Question: 3. (35 points) A monopolist faces a market evenly split between high valua- tion consumers, with individual demand funection P =10y (6) and low valuation

3. (35 points) A monopolist faces a market evenly split between high valua- tion consumers, with individual demand funection P =10y" (6) and low valuation consumers with individual demand function Pl=8_2' (7) For convenience, suppose the firm has a marginal cost equal to zero. Ar- bitrage is impossible for this good. a. Suppose the firm can observe group status. Determine the firm's profit-maximizing third degree pricing scheme for these groups. Show this outcome on a graph. b. Now suppose the firm cannot observe group status and so must use second degree price discrimination. Determine the firm's best second- degree pricing scheme. Show this outcome on a graph, and explain why your answer is the best outcome for the firm. c. Which of these two outcomes (second degree and third degree) is better from the economy's view

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