A two-part tariff system will be beneficial to the consumers only if the fee they pay is _______________ the consumer surplus they enjoy by buying the good at price p*.

Question

Quizplus · Accepted Answer

If the fee paid by the consumers is less than the consumer surplus they enjoy by buying the good at price p*, they will end up with a surplus even after paying the fee. In this case, the two-part tariff system will be beneficial to the consumers. If the fees paid are equal to or greater than the consumer surplus, consumers will not benefit or may even end up worse off, respectively. Therefore, the best choice is A.

A Two-Part Tariff System Will Be Beneficial to the Consumers