A firm using a two -part tariff faces a tradeoff because
A) the smaller the variation between the parts of the price the greater the deadweight loss generated by the pricing scheme.
B) the only way to increase total revenue is to lower per -unit profit.
C) any increase in consumer surplus must be offset by a decrease in producer surplus.
D) the only way to increase the fixed -fee portion of the price is to lower the per -unit portion of the price.

Question

Quizplus · Accepted Answer

The two-part tariff involves a fixed fee and a per-unit price. Increasing the fixed fee often necessitates lowering the per-unit price to maintain attractiveness to consumers, balancing revenue from the fixed fee with volume sold.

A Firm Using a Two -Part Tariff Faces a Tradeoff