- The following is the example we used in class to study quantity discount. A monopoly firm has two potential buyers, A and B, who each has a demand for the firm's product up to 2 units. Their willingness to pay for each unit are: A B 1st unit 2nd unit 7.01 10.01 2.01 5.01 Once again, we assume there is no production cost. Now instead of offering a quantity discount, the firm announces, "There are two ways to buy our product. You can pay $T to become a member. Once you are a member, you can have 2 units for free. For non-members, we sell our product at $p per unit." a. (2 points) What is the highest T that the firm can set so that both A and B are willing to become a member? What will be the firm's profit? b. (4 points) Now think along the line that the firm wants B to choose to become a member but not A. Suppose the firm sets p = 7. What is the highest T the firm can set so that B is willing to become a member? In this case, what is the firm's profit?