A Firm Has Two Customers and Creates a Two-Part Tariff

question 61

Multiple Choice

A firm has two customers and creates a two-part tariff with a usage fee (P) that exceeds the marginal cost of production and leaves each customer with positive consumer surplus such that CS₂ > CS₁ > 0. If the firm sets the entry fee equal to CS₂, then the number of customers that actually buy the product is equal to:

• A) zero.
• B) one.
• C) two.
• D) We don't have enough information to answer this question.

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Definitions:

Legal Costs

Expenses incurred due to legal services, which can include lawyer fees, court fees, and other related expenses.

Intangible Assets

Non-physical assets owned by a firm, such as copyrights, patents, trademarks, and goodwill, that have value and can generate future economic benefits.

Balance Sheet

An accounting document that lists a business's assets, liabilities, and the equity of its shareholders at a specific date.

Goodwill

An intangible asset that arises when a business is acquired for more than the fair value of its net assets, representing the company's reputation, customer relationships, and other unquantifiable factors.