Two-part tariffs offer a mechanism whereby the firm can
A)charge two different prices to distinct groups of customers.
B)collect two times as much from consumers as a single-price monopoly can.
C)capture some or all of the consumer surplus.
D)reduce some of its fixed costs.

Question

Quizplus · Accepted Answer

Two-part tariffs allow firms to charge a fixed fee in addition to a per-unit price. This allows the firm to capture some or all of the consumer surplus as the fixed fee serves as a way to charge consumers for the value they place on the product. Therefore, choice C is correct as the firm can capture some or all of the consumer surplus.

Two-Part Tariffs Offer a Mechanism Whereby the Firm Can