Which of the Following Strategies Will Allow a Monopolist to Earn

question 70

Multiple Choice

Which of the following strategies will allow a monopolist to earn higher profits by employing a two-part tariff on consumers with different demands?

• A)Setting price equal to the marginal cost
• B)Setting price above the marginal cost
• C)Setting an entry fee equal to the consumer surplus
• D)Setting an entry fee higher than the consumer surplus

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Definitions:

Supply Shift

A movement of the supply curve to the left or right, indicating a change in the quantity supplied at each price, usually in response to a change in determinants other than price.

Total Surplus

The sum of consumer and producer surplus, representing the total net benefit to society from the production and consumption of goods or services.

Consumer Surplus

The discrepancy between the total price consumers are ready to pay for a good or service and what they actually pay for it.

Producer Surplus

The disparity between the price at which sellers are prepared to offer a product and the actual selling price they get.