Suppose there are two types of consumers with two different demand curves,and the marginal cost of the monopoly is $10.What could be the possible price under two-part pricing that will maximize the monopoly profit?
A)$8
B)$9
C)$10
D)$12

Question

Quizplus · Accepted Answer

Under two-part pricing, the monopoly charges a fixed fee (or access fee) and a per-unit price for each unit consumed. To maximize profit, the monopoly must set the per-unit price equal to marginal cost and the fixed fee equal to the consumer surplus (i.e., the difference between the maximum willingness to pay and the per-unit price) of the consumers. 
Since there are two types of consumers with different demand curves, the monopoly can charge different fixed fees for each type of consumer. Let's assume that the demand curves are such that type 1 consumers have a higher maximum willingness to pay than type 2 consumers. In this case, the monopoly would charge a higher fixed fee for type 1 consumers and a lower fixed fee for type 2 consumers.
The per-unit price should be set equal to marginal cost of $10. This ensures that the monopoly is not charging more than the cost of producing the good.

Therefore, the best choice is (D) $12.

Suppose There Are Two Types of Consumers with Two Different