For most residential telephone service, people pay a monthly fee to have a hookup to the telephone company's line plus a fee for each call actually made. Under this pricing scheme, the telephone company is using:

Question

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The pricing scheme described is a two-part tariff, which consists of a fixed fee (monthly fee for hookup) and a variable fee (fee for each call made). This pricing strategy allows the telephone company to capture some of the consumer surplus while still providing services at a competitive price.

For Most Residential Telephone Service, People Pay a Monthly Fee