HOMEWORK - NONLINEAR PRICING Let the inverse demand function for a single product be p(y) = y + 18 Consider a firm offering the single product with a cost function, C(y) = F + m y where the Fixed Cost, F = 39, and the marginal cost, m = 2 (Recall producer surplus = producer profit). Now consider three pricing schemes. Include sketches in the y-p plane to identify the respective surpluses (i) Scheme 1 Let m be the lowest uniform price that allows the firm to break even Let y1 be the demand at this price Compute m1 and y1, and the consumer and producer surpluses (ii) Scheme 2 The nonlinear pricing scheme is consumer's payments = m y if y s y1 =m1Y1+m2(yY1) ify1