For a two-part tariff imposed on two consumers, the entry fee is based on the:
A) consumer surplus of the customer with lower willingness-to-pay.
B) consumer surplus of the customer with higher willingness-to-pay.
C) simple average of the consumer surplus for the two buyers.
D) none of the above

Question

Quizplus · Accepted Answer

The entry fee is based on the consumer surplus of the customer with lower willingness-to-pay. This is because the customer with lower willingness-to-pay is more likely to be excluded from the market if the entry fee is too high.

For a Two-Part Tariff Imposed on Two Consumers, the Entry