A Firm Using a Two-Part Tariff Can Produce the Economically

question 78

Multiple Choice

A firm using a two-part tariff can produce the economically efficient outcome by

• A)making the fixed-fee portion of the price as low as possible.
• B)setting the per-unit portion of the price equal to the marginal cost of production.
• C)setting the per-unit portion of the price equal to the average cost of production.
• D)setting the fixed-fee portion of the price at some proportion to the fixed cost of production.

---

Definitions:

Normal Balance

The side (debit or credit) of an account that is typically increased.

Financial Statement

A documented account of financial transactions and standing for businesses, individuals, or alternative entities.

Permanent/Temporary

Terms distinguishing between accounts that are not closed out or reset at the end of the accounting year (permanent accounts) and those that are (temporary accounts).

Normal Balance

The standard side (debit or credit) on which increases to an account are recorded.