With an optimal two-part tariff
A)consumer surplus equals producer surplus.
B)all consumer surplus is transformed into profit.
C)consumers maximize consumer surplus.
D)the firm earns zero profit.

Question

Quizplus · Accepted Answer

In an optimal two-part tariff, the firm sets a fixed fee to capture all consumer surplus as profit, while the per-unit price is set at marginal cost, maximizing total profit.

With an Optimal Two-Part Tariff