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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