a. i. Derive reservation value for buyers. 

       Total Utility = Mug Utility + Money Utility

       Total Utility = c + v(c-r) + m

       If the buyer buys: c=1, r=0

       T.U. = 1+ v(1) + (w-p)

       T.U = 1 + 2 + (1000-p)

       if the buyer doesn’t buy: r=0, c=0

       T.U. = 0 + w. 

       The buyer’s reservation value:  T.U. of buying > T.U. of not buying

                So   3-p>o  –>  p<3. 

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