Suppose that a night club's customers all have the same inverse demand curve for drinks, P = 5 - Q, where P is the price per drink and Q is the number of drinks. The marginal cost of a drink is $1. With the optimal two-part tariff pricing strategy, how much do customers pay to get into the nightclub?
A) $5
B) $10
C) $8
D) $6

Question

Quizplus · Accepted Answer

The optimal two-part tariff involves setting the price per drink equal to the marginal cost ($1) and charging an entry fee equal to the consumer surplus. The consumer surplus is the area of the triangle under the demand curve above the price line, which is (1/2) * (4) * (4) = $8.

Suppose That a Night Club's Customers All Have the Same