20. Two-part tariff." A two-part tariff is another price-discrimination method where the producer of argood is able to capture the entire consumer surplus. An example of this might be an amusement park that charges a fee for entry (the tariff), and then charges the customer for each ride (by buying tickets). Let's investigate how a firm sets the optimal two-part tariff by assuming that we have 100 consumers each, with demand for rides of p=9-q, and the costs of running the amusement park are C(q)=100+q. (a) Uniform pricing. If the firm acts as a monopoly, setting a single price, what is its profit- maximizing price, quantity of rides (per person and aggregate), and profit? (b) Marginal cost pricing. If the firm sets its price per ride equal to marginal cost, what is the number of rides it will sell (per person and aggregate) and consumer surplus? (c) Two-part tariff. If the amusement park uses a two-part tariff, setting its entrance fee equal to consumer surplus while charging a price per ride equal to its marginal cost, what is its total profit?

20. Two-part tariff." A two-part tariff is another price-discrimination method where the producer of argood is able to capture the entire consumer surplus. An example of this might be an amusement park that charges a fee for entry (the tariff), and then charges the customer for each ride (by buying tickets). Let's investigate how a firm sets the optimal two-part tariff by assuming that we have 100 consumers each, with demand for rides of p=9-q, and the costs of running the amusement park are C(q)=100+q. (a) Uniform pricing. If the firm acts as a monopoly, setting a single price, what is its profit- maximizing price, quantity of rides (per person and aggregate), and profit? (b) Marginal cost pricing. If the firm sets its price per ride equal to marginal cost, what is the number of rides it will sell (per person and aggregate) and consumer surplus? (c) Two-part tariff. If the amusement park uses a two-part tariff, setting its entrance fee equal to consumer surplus while charging a price per ride equal to its marginal cost, what is its total profit?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

B
20. Two-part tariff. A two-part tariff is another price-discrimination method where the producer of
argood is able to capture the entire consumer surplus. An example of this might be an amusement
park that charges a fee for entry (the tariff), and then charges the customer for each ride (by buying
tickets). Let's investigate how a firm sets the optimal two-part tariff by assuming that we have 100
consumers each, with demand for rides of p=9-q, and the costs of running the amusement park
are C(q)=100+q.
(a) Uniform pricing. If the firm acts as a monopoly, setting a single price, what is its profit-
maximizing price, quantity of rides (per person and aggregate), and profit?
(b) Marginal cost pricing. If the firm sets its price per ride equal to marginal cost, what is the
number of rides it will sell (per person and aggregate) and consumer surplus?
(c) Two-part tariff. If the amusement park uses a two-part tariff, setting its entrance fee equal to
consumer surplus while charging a price per ride equal to its marginal cost, what is its total
profit?

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