A profit-maximizing monopolist employing a two-part tariff on consumers having different demands,_____.
A)should simply set price to maximize total revenue
B)should charge a single price,with no entry fee,like a regular monopolist
C)should set price equal to average cost plus a constant profit margin
D)does not have a clearly defined profit-maximizing pricing scheme

Question

Quizplus · Accepted Answer

A two-part tariff involves both an entry fee and a per-unit price. The profit-maximizing strategy for a monopolist using a two-part tariff, especially when facing consumers with different demands, is complex and depends on various factors such as the distribution of consumer valuations, the cost structure, and the ability to segment the market. It's not as straightforward as simply setting price to maximize total revenue, charging a single price with no entry fee, or setting price equal to average cost plus a constant profit margin.

A Profit-Maximizing Monopolist Employing a Two-Part Tariff on Consumers Having