Author Question: A firm has two customers with non-identical demands and a constant marginal cost of production. At ... (Read 73 times)

kaid0807 · **on:** Jul 1, 2018

A firm has two customers with non-identical demands and a constant marginal cost of production. At any positive price, the consumer surplus values for the two customers are related as CS2 CS1 .

What can we say about the optimal two-part tariff for the firm? A) The firm sets the price equal to MC and the optimal tariff is equal to CS2.
B) The firm sets the price equal to MC and the optimal tariff is equal to CS1.
C) The firm sets the price equal to MC and the optimal tariff is equal to zero.
D) The optimal price is greater than MC and the optimal tariff is equal to CS1.

Question 2

Refer to Figure 9.4. If the government establishes a price floor of 40 and purchases the surplus, total consumer and producer surplus will be

A) 15.
B) 30 widgets.
C) 1,050.
D) 1,200.
E) 1,350