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Assume That a Firm Is Able to Use an Optimal

question 6

Essay

Assume that a firm is able to use an optimal two-part tariff.
a.Is the outcome economically efficient? Why or why not?
b.What happens to consumer surplus?
c.Does this represent perfect price discrimination? Why or why not?


Definitions:

Net Income

The total profit of a company after subtracting all expenses, taxes, and costs from total revenue.

Financing Activities

Activities that result in changes in the size and composition of the equity capital and borrowings of an entity, including issuing debt, equity, and paying dividends.

Cash Flows

The sum of funds entering and exiting a company, particularly influencing its liquid assets.

Financing Activities

Transactions that result in changes in the size and composition of the equity capital or borrowings of a company.

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