The economic efficiency of a natural monopoly can be improved with the use of two- part tariffs because it allows the monopoly to
A) charge users according to their willingness to pay.
B) lower its total costs.
C) charge residential users different rates than business users.
D) charge users according to their ability to pay.
E) charge users separately for fixed and variable costs.

Question

Quizplus · Accepted Answer

Two-part tariffs allow a natural monopoly to charge a fixed fee to cover fixed costs and a variable fee based on usage, improving economic efficiency by aligning charges more closely with the cost structure.

The Economic Efficiency of a Natural Monopoly Can Be Improved