Consider the cinema example (monopolist). the cinema has two types of customers: students and adults. Suppose the demand curve for students is now 1() = max{0, 21 } and that for adults remains 2() = max{0, 20 /2}. Marginal cost is 1 = 5 for students and 2 = 4 for adults.

a. (6 marks) Suppose the cinema does not price-discriminate. What is the optimal price and profit? ( i guess using aggregate demand)

b. (7 marks) If the cinema third-degree price-discriminates between adults and students, what are the profit maximizing prices for each segment?

c. (10 marks) Compute the consumer surplus of each segment under uniform pricing and under price discrimination.

d. (10 marks) Describe the welfare implications of third-degree price discrimination in this example. How does each segment's surplus compare between uniform pricing and price discrimination? How does the aggregate consumer surplus compare? Provide one example where a policy maker keen on consumer welfare may prefer the outcome contrary to the recommendation that is based on the aggregate surplus comparison between the two pricing outcomes.