Which of the Following Statements Is True About Optimal Two-Part

question 209

Multiple Choice

Which of the following statements is true about optimal two-part tariff and perfect price discrimination for a given demand curve?

• A)The total revenue received under the two pricing schedules is the same.
• B)The total revenue received under an optimal two-part tariff exceeds that received under perfect price discrimination.
• C)The total revenue received under an optimal two-part tariff is less than that received under perfect price discrimination.
• D)The total revenue received under an optimal two-part tariff could be greater than, less than, or equal to that received under perfect price discrimination, depending on the fixed-fee portion of the two-part tariff.

---

Definitions:

Conversion Costs

Conversion costs are the total expenses incurred in turning raw material into a finished product, including labor and overhead costs.

Forming Department

A specific section within a manufacturing facility where raw materials are shaped or formed into parts for further production processes.

Weighted-Average Method

An inventory valuation method that calculates the cost of goods sold and ending inventory based on the average cost of all inventory items.

Assembly Department

A division within a manufacturing facility where components are put together to form a final product.