A flat fee pricing scheme for water supplies
A) is the same as a uniform rate pricing scheme
B) charges higher fees for higher water usage
C) is efficient, assuming rising marginal social cost (MSC) of water provision
D) creates an incentive to conserve water
E) none of the above

Question

Quizplus · Accepted Answer

A flat fee pricing scheme charges customers a fixed rate regardless of their usage, so it does not differentiate based on the quantity of water consumed. Therefore, it does not charge higher fees for higher usage, which eliminates options B and C. However, since a flat fee pricing scheme does not differentiate based on usage, it does not provide an incentive to conserve water (option D). Therefore, the correct answer is E ("none of the above").

A Flat Fee Pricing Scheme for Water Supplies