A two-part tariff is a form of:
A)first-degree price discrimination because average cost falls with quantity purchased.
B)second-degree price discrimination because average price paid by the consumer falls with higher quantity purchased.
C)block pricing because marginal cost rises with quantity sold.
D)third-degree price discrimination because different customers pay different prices.

Question

Quizplus · Accepted Answer

A two-part tariff is a pricing strategy where customers pay a fixed fee (the first part) to access a product or service and an additional fee (the second part) per unit of consumption. This pricing strategy is used to extract maximum consumer surplus while capturing additional revenue from high quantity users. The second part of the tariff decreases with the quantity purchased, which is a characteristic of second-degree price discrimination.

A Two-Part Tariff Is a Form Of