When a monopolist requires a customer to pay an initial fee for the right to buy a product as well as a usage fee for each unit of the product bought,this is known as a(n):
A) bundling contract.
B) price differentiation.
C) oligopolistic device.
D) two-part tariff.
E) maximizing device.

Question

Quizplus · Accepted Answer

This pricing strategy is known as a two-part tariff where the monopolist charges an initial fee for the right to purchase the product, followed by a usage fee for each unit of the product bought. This enables the monopolist to extract more consumer surplus while maintaining a higher level of profits.

When a Monopolist Requires a Customer to Pay an Initial