Suppose you are a monopolist and you have two customers, Joseph and Monique. Each will buy either zero or one unit of the good you produce. Joseph is willing to pay up to $50 for your product; Monique is willing to pay up to $20. You produce this good at a constant average and marginal cost of $5.
a. If you could not engage in price discrimination, what price would you charge? How much profit would you earn?
b. If you could practice price discrimination what prices would you charge? How much profit would you earn? For simplicity, assume that if a consumer is indifferent between buying and not buying that he will buy.