In Two-Part Pricing with Identical Consumers, a Firm

question 7

Multiple Choice

In two-part pricing with identical consumers, a firm

• A)charges a lump-sum fee equal to the consumer surplus.
• B)sets unit price below marginal cost.
• C)should go with single-price monopoly pricing to maximize profits.
• D)Both A and B.

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Definitions:

Opportunity Cost

Opportunity cost is the value of the best alternative foregone when a decision is made to pursue a particular action or resource allocation.

Machinery

Machines or machine systems collectively, which are used in a variety of industries to produce or facilitate the production of goods.

Sweaters

Garments intended to cover the upper body and arms, typically knitted from wool, cotton, or synthetic fibers.

Production Possibility Frontiers

A portrayal conveying the absolute production potential for two commodities, hinging on distinct inputs such as resources and supplementary factors.