Laura runs a nightclub.Given the popularity and cache of the club, she has a monopoly position in the market.Each potential nightclub goer has the same demand of P = 22 - q, and there are 1000 customers in total in the market.Laura has a marginal cost per drink of MC = $2 per unit and no fixed cost.If Laura can charge an entry fee as well as for each drink, which statement is true?
A)Laura charges an entry fee of $200 and $2 per drink; she makes a profit of $200 000; there is zero DWL generated in this market.
B)Laura charges an entry fee of $0 and $12 per drink; there is a DWL of $72 generated in this market.
C)Laura charges an entry fee of $250 and $2 per drink; there is zero DWL generated in this market.
D)Laura charges an entry fee of $50 and $2 per drink; she makes a profit of $0; there is zero DWL generated in this market.
E)None of the above.

Question

Quizplus · Accepted Answer

Laura charges an entry fee of $200 and $2 per drink; she makes a profit of $200 000; there is zero DWL generated in this market.

Laura Runs a Nightclub