Two-part pricing allows the monopoly firm to capture all of the ...

[michelleunicorn]

Two-part pricing allows the monopoly firm to capture all of the potential consumer surplus generated by the sale of its product.
 
  Indicate whether the statement is true or false

Question 2

Governments impose excise taxes on goods that have inelastic demand, such as cigarettes, more often than in other cases. Why?
 
  What will be an ideal response?

[InfiniteSteez]

Answer to Question 1

False. This is only the case if all consumers are identical. If consumers differ, no single price can capture all the consumer surplus.

Answer to Question 2

Imposing an excise tax reduces the supply of the good, reducing equilibrium quantity and raising the price. If demand is elastic, taxes will tend to reduce quantity by a significant amount, and thus government tax revenues will be relatively small. However, if demand is inelastic, the reduction in quantity will be small, and government tax revenues will be higher. (Governments may also impose taxes to deter consumption, but this is likely to be ineffective if elasticity is low.)