The first column shows the number of donuts, and the second and third columns show Shane’s and Miriam’s marginal personal use value schedule. Assume that Rick can only sell whole donuts (i.e., not fractions), and that “ties go to the donuts” (i.e., if the consumer is indifferent between consuming or not consuming, assume the consumer consumes).

1. Suppose that the marginal cost of donuts is $1 (that is, Rick can produce as many donuts as he wants for $1 each), and Rick must offer a single price to both Shane and Miriam, and let them each buy as many donuts as they want at that price. Calculate the price that maximizes Rick’s total profit, the quantities that each Shane and Miriam will purchase at that price, and Rick’s total profit.

   [Hint: You first need to derive the "market" demand curve. For each price from $2.00 to $0.10 (in $0.10 increments) compute Shane's quantity demanded and Miriam's and quantity demand. Add these two together to get the market demand quantity. Then, compute the total revenue (price x quantity) and the marginal revenue (the change in total revenue divided by the change in quantity at each $0.10 increment). Rick's profit is maximized where MR = MC.]

2. Suppose that Rick can offer one price to Shane and a different price to Miriam. Calculate the price Rick offers to Shane, the price Rick offers to Miriam, the quantities that each Shane and Miriam will purchase at that price, and Rick’s total profit.

Number of Donuts	Shane's Marginal Personal Use Value	Miriam's Marginal Personal Use Value
0	$0.00	$0.00
1	$2.00	$1.50
2	$1.90	$1.45
3	$1.80	$1.40
4	$1.70	$1.35
5	$1.60	$1.30
6	$1.50	$1.25
7	$1.40	$1.20
8	$1.30	$1.15
9	$1.20	$1.10
10	$1.10	$1.05
11	$1.00	$1.00
12	$0.90	$0.95
13	$0.80	$0.90
14	$0.70	$0.85
15	$0.60	$0.80
16	$0.50	$0.75
17	$0.40	$0.70
18	$0.30	$0.65
19	$0.20	$0.60
20	$0.10	$0.55

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