Figure 16-2 Watanabe Sensei operates the only martial arts school in Hartfield.For simplicity,assume that consumers have identical demand curves and that Sensei knows what this demand curve is.Figure 16-2 shows this demand curve.
-Refer to Figure 16-2.With a two-part pricing scheme - a monopoly price for classes and a one-time membership fee - what is the amount of producer surplus Sensei will earn?

Question

Figure 16-2  Watanabe Sensei operates the only martial arts school in Hartfield.For simplicity,assume that consumers have identical demand curves and that Sensei knows what this demand curve is.Figure 16-2 shows this demand curve.
-Refer to Figure 16-2.With a two-part pricing scheme - a monopoly price for classes and a one-time membership fee - what is the amount of producer surplus Sensei will earn?

Quizplus · Accepted Answer

In a two-part pricing scheme, the producer surplus is maximized by charging a monopoly price for each unit sold and a membership fee that captures the entire consumer surplus. This results in a producer surplus equal to the entire area under the demand curve above the marginal cost, which is A + B + C + D + H + G.

Figure 16-2 Watanabe Sensei Operates the Only Martial Arts