There are two goods, goods 1 and 2, and 100 consumers in an economy. Each consumer has utility function U(x1, x2 ) = 10x1 - x1 2 2 + x2. The price of good 2 is 1 and all consumers have incomes of 1000. Suppose that a monopolist can produce good 1 at a constant cost of 1 per unit and that he uses a two-part tariff where a consumer must pay a lump sum K to be able to buy good 1. A consumer who has paid lump sum K can buy as much as he wants at price P. What is the highest amount of K that a consumer is willing to pay to buy at price P? a. 40.5 b. 40 c. 50 d. 50.5

There are two goods, goods 1 and 2, and 100 consumers in an economy. Each consumer has utility function U(x1, x2 ) = 10x1 - x1 2 2 + x2. The price of good 2 is 1 and all consumers have incomes of 1000. Suppose that a monopolist can produce good 1 at a constant cost of 1 per unit and that he uses a two-part tariff where a consumer must pay a lump sum K to be able to buy good 1. A consumer who has paid lump sum K can buy as much as he wants at price P. What is the highest amount of K that a consumer is willing to pay to buy at price P? a. 40.5 b. 40 c. 50 d. 50.5

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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