Figure 16-5

-Refer to Figure 16-5.Suppose the firm represented in the diagram decides to use a two-part pricing strategy such that it charges a fixed fee and a per-unit price equal to the monopoly price.(This is also called a two-part tariff.)What is the quantity it should produce?
A)240 units
B)320 units
C)480 units
D)560 units

Question

Figure 16-5
 
-Refer to Figure 16-5.Suppose the firm represented in the diagram decides to use a two-part pricing strategy such that it charges a fixed fee and a per-unit price equal to the monopoly price.(This is also called a two-part tariff.)What is the quantity it should produce?
A)240 units 
B)320 units 
C)480 units 
D)560 units

Quizplus · Accepted Answer

To determine the optimal quantity, we need to find the point where marginal revenue (MR) equals marginal cost (MC), which occurs at a quantity of 320 units. Since the firm is charging a fixed fee in addition to the per-unit price, it can capture some additional consumer surplus and increase its profits.

Figure 16-5 -Refer to Figure 16-5.Suppose the Firm Represented in the Diagram