The remaining questions on this page are based on the graph below for a firm wit
ID: 1197456 • Letter: T
Question
The remaining questions on this page are based on the graph below for a firm with market power, which shows marginal cost and demand of a representative consumer in the market. If the firm in question decides to implement 'regular' monopoly pricing, the optimal price is If the firm decides to use block pricing, the optimal size of a package (a block) is If the firm decides to sell the product using two-part pricing, what is the optimal fixed fee? Under two-part pricing, what is the optimal per unit price?Explanation / Answer
Answer 6.3 is (b) $3.50 , since a monopolist equates MR with MC and charge price as per Demand equation/curve
Answer 6.4 is (c) 6 , since, under block pricing, consumer does not have a choice except to go without it and thus he has to buy the product where demand curve equates with MC curve
Answer 6.5 is (c) $9 , since, under two-part pricing, monopolist charges a fixed charge of entire consumer surplus which is the area of triangle above the MC curve and between demand curve. Thus the fixed charges = 1/2 * 3 * 6 = 9
Answer 6.6 is (a) $2, since, under two-part pricing, the per unit cost is equal to the constant MC i.e. $2 in this case