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 revenue collected from the fixed fee portion of the price?

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 revenue collected from the fixed fee portion of the price?

Quizplus · Accepted Answer

To calculate the revenue from the fixed fee portion of the price, we need to find the quantity sold at the monopoly price (where MR=MC) and multiply it by the difference between the monopoly price and the variable cost. In this case, the monopoly price is $80 and the variable cost is $20, so the profit per unit sold is $60. The quantity sold at the monopoly price is 40 units ($80 = $20 + $60Q, solve for Q). Therefore, the revenue collected from the fixed fee portion of the price is $2,560 ($64 per unit x 40 units).

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