What price does a monopoly charge when it perfectly implements a two- part tariff?
A)a price higher than the monopolist price
B)a price between the competitive and monopolist prices
C)the monopoly price
D)the competitive price

Question

Quizplus · Accepted Answer

In a two-part tariff, a monopoly charges the competitive price for the product itself, aiming to maximize the quantity sold, and then adds a fixed fee (the second part of the tariff) that captures consumer surplus. This strategy allows the monopoly to effectively extract more consumer surplus, making the product's marginal price equal to the marginal cost, as in competitive markets.

What Price Does a Monopoly Charge When It Perfectly Implements