Figure 16-4
-Refer to Figure 16-4.Suppose the firm represented in the diagram decides to use a two-part pricing strategy such that it charges a fixed fee and a per-unit price equal to the monopoly price.What is the profit earned under this pricing scheme?
A) $5,760
B) $6,400
C) $7,680
D) $7,870

Question

Figure 16-4 
-Refer to Figure 16-4.Suppose the firm represented in the diagram decides to use a two-part pricing strategy such that it charges a fixed fee and a per-unit price equal to the monopoly price.What is the profit earned under this pricing scheme?
A) $5,760 
B) $6,400 
C) $7,680 
D) $7,870

Quizplus · Accepted Answer

Under two-part pricing, the firm charges a fixed fee of $2,560 per year and a per-unit price equal to the monopoly price of $18. The profit earned can be calculated as follows:

Profit = (Price - Marginal Cost) x Quantity - Fixed Fee
Profit = ($18 - $8) x 320 - $2,560
Profit = $6,400

Therefore, the profit earned under this pricing scheme is $6,400.

Figure 16-4 -Refer to Figure 16-4.Suppose the Firm Represented in the Diagram