Figure 16-4
-Refer to Figure 16-4.Suppose the firm represented in the diagram decides to use a two-part pricing strategy such that it charges a fixed fee and a per-unit price equal to the competitive price.(This is also called an optimal two-part tariff.) What is the total revenue it can expect to collect from the fixed fee portion of the price?
A) $2,560
B) $5,760
C) $7,870
D) $10,240

Question

Figure 16-4 
-Refer to Figure 16-4.Suppose the firm represented in the diagram decides to use a two-part pricing strategy such that it charges a fixed fee and a per-unit price equal to the competitive price.(This is also called an optimal two-part tariff.) What is the total revenue it can expect to collect from the fixed fee portion of the price?
A) $2,560 
B) $5,760 
C) $7,870 
D) $10,240

Quizplus · Accepted Answer

Using a two-part pricing strategy, the firm charges a fixed fee plus a per-unit price equal to the competitive price. The fixed fee is the maximum amount the consumer is willing to pay, which is $40. Therefore, the fixed fee revenue is $40 x 64 = $2,560. The per-unit price is equal to the competitive price, which is $20. The total revenue from sales is equal to quantity sold multiplied by the per-unit price, which is $20 x 64 = $1,280. The total revenue from the two-part pricing strategy is equal to the sum of fixed fee revenue and per-unit price revenue, which is $2,560 + $1,280 = $3,840.

Figure 16-4 -Refer to Figure 16-4.Suppose the Firm Represented in the Diagram