Consider a profit-maximizing monopolist whose consumers have identical demand curves.Which of the following will be true if the firm employs a two-part tariff pricing strategy for these consumers?
A)The firm will produce less output compared to a firm that is not using this pricing strategy.
B)The firm will capture the entire consumer surplus.
C)The firm will charge a tariff that also maximizes revenues.
D)The firm will charge consumers a different entry fee,but a constant per-unit price.

Question

Quizplus · Accepted Answer

A two-part tariff allows the monopolist to capture the entire consumer surplus by charging an entry fee equal to the consumer surplus and a per-unit price equal to marginal cost.

Consider a Profit-Maximizing Monopolist Whose Consumers Have Identical Demand Curves