Figure 16-5
-Refer to Figure 16-5. Consider the following two pricing strategies:
a. a fixed fee and a per-unit price equal to the monopoly price
b. a fixed fee and a per-unit price equal to the competitive price
The firm represented in the diagram earns a higher profit under strategy ________ and deadweight loss is eliminated under ________.
A) b; b
B) a; b
C) a; neither strategy
D) b; neither strategy

Question

Figure 16-5 
-Refer to Figure 16-5. Consider the following two pricing strategies: 
a. a fixed fee and a per-unit price equal to the monopoly price
b. a fixed fee and a per-unit price equal to the competitive price
The firm represented in the diagram earns a higher profit under strategy ________ and deadweight loss is eliminated under ________.
A) b; b 
B) a; b 
C) a; neither strategy 
D) b; neither strategy

Quizplus · Accepted Answer

Under strategy b, the firm charges a competitive per-unit price, which maximizes consumer surplus and eliminates deadweight loss. Additionally, the fixed fee allows the firm to capture consumer surplus, leading to higher profits.

Figure 16-5 -Refer to Figure 16-5. Consider the Following Two Pricing Strategies