Reference no: EM132355059

German brothels recently began offering a monthly subscription service for multiple purchasers. If you thought that the brothels' encouragement of prostitution was immoral to begin with, would you consider this pricing plan to be even more immoral?

Suppose a particular patron at a German brothel has the following willingness-to-pay schedule for services at the brothel, per session.

Session Willingness to Pay

1st $77

2nd $66

3rd $55

4th $44

5th $33

6th $22

Suppose this consumer would not demand any more sessions, even for free. Also assume that the marginal cost to the brothel, per session, is constant at $11.

At a price of $60.50 per session, the number of sessions demanded by this consumer would be ? . At this price and quantity, consumer surplus is $____ and producer surplus is $_____ .

Suppose the brothel has devised a new pricing scheme for consumers who demand more than 1 session. This pricing scheme is a subscription service, whereby consumers can pay a flat fee of $222.75 and can have up to 6 sessions total.

Using this subscription pricing model, this consumer would demand (2/3/4/5/6) sessions. Under this scenario, consumer surplus is $____and producer surplus is $___. (Hint: For consumer surplus, consider how much total value the consumer places on all sessions, versus the total price paid.)