c. If George is very experienced and knows the reservation prices of each customer, how many portraits will he produce each day and how much economic profit will he earn? d. Assume George charges only 2 different prices. He know that customers with reservation prices above $30, will never use coupons and the customers with reservation prices below will always use coupons. What price should George charge for portraits and what discount should he offer on the coupon? TotsPoses Inc., a profit-maximizing business, is the onlyphotography business in town that specializes in portraits ofsmall children. George, who owns and runs TotsPoses,expects to encounter an average of eight customers per day,each with a reservation price (shown in the followingtable). Assume George has no fixed costs, and his cost ofproducing each portrait is $12.Customer12345678Reservation price($ per photo)5046423834302622

On the demand side the reservation price refers to the highest price that a customer is willing to pay; and on the supply side the reservation price refers to the lowest price producer is willing to accept for a product or service.Part-3) Computation of total revenue and marginal revenue CustomerReservation priceTotal revenue Marginal revenue($ per photo)($ per day)($ per photo)1501*50 = $502462*46 = $96($96-$50)/(2-1) = $423423*42 = $126($126-$96)/(3-2) = $344384*38 = $152($152-$126)/(4-3) = $265345*34 = $170($170-$152)/(5-4) = $186306*30= $180($180-$170)/(6-5) = $107267*26 = $182($182-$180)/(7-6) = $28228*22 = $176($176-$182)/(8-7) = -$6Formulas used:Total revenue = Customer * Reservation priceMarginal revenue = Change in total revenue / Change in customerGeorge is aware of the reservation prices thus can perfectly price discriminate and applies the ffirst degree price discrimination.. As a result Geogre will charge each customer its own reservation price. Because the lowest reservation price i.e. $22 a consumer is willing to exceed George’s cost of production by $12; therefore George will produce all 8 portraits. He serves all the customers because all the reservation prices are less than the marginal cost.His economic profit will be:Part-4) George is allowed to charge two prices thus permitting him as a second degree price discriminator. Therefore the George will charge a list price for which the reservation price exceeds $30; This can be achieved by setting the list price at $34. At this price 5 customers can be servedFor the discounted market, George will be required to fix the discount price that is equal to the lowest reservation price. Thus the discount price should be $22Part-3) 8 portraits; Economic profit = $192Part-4) Price charged for portraits = $34Discount offered on the coupon = $22