Both first-degree price discrimination and optimal two-part tariff pricing maximise economic surplus.

Question

Quizplus · Accepted Answer

Both first-degree price discrimination and optimal two-part tariff pricing allow firms to capture a greater portion of consumer surplus, resulting in an increase in total economic surplus. This is because they allow firms to charge different prices to different consumers based on their willingness to pay, thereby increasing revenue and profits while also ensuring that consumers who value the product more are able to purchase it. Therefore, both pricing strategies can be used to maximize economic surplus.

Both First-Degree Price Discrimination and Optimal Two-Part Tariff Pricing Maximise