A monopolist with a marginal cost MC = 2 faces two types of customer groups. Type 1 has it inverse demand function P1 = 10 - 0.5x, while type 2 has the inverse demand function P2 = 10-x. What prices will the monopolist charge if he can discriminate on price between the two groups? Calculate, illustrate with the help of figures and explain the intuition behind the result.

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