A firm produces washing machines at a cost of $200 per unit. The demand for washing machines comes from two types of customers, those that already have an old washing machine at home and are considering replacing it with a new one and those that don't have one at home. Suppose, initially, that there is no market for the old machines (i.e., their market price is 0). The demand for a new washing machine by those who do not have a machine at home is: P=2,000-0.5Q. The demand for a new washing machine by those who do have an old machine is given: P=1,100-Q. a. Assume that the firm can discriminate between the two types of consumers and charge different price per washing machine by offering a discount for the new machine for those who brings their old machines. What are the prices that the firm will charge in this case? what is the firm's profit in this case? b. How would your answers to part (a) above change if I told you that the firm can sell the old machines at a price of $300 unit? per c. Ignore part (b). Assume that the firm cannot discriminate between the two consumers since it does not have the option to check those who has old machines. How much will the firm agree to pay an outside company to check those who has old machines such that it will be able to charge different prices?

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