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?

Macroeconomics

13th Edition

ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter5: Supply, Demand, And Price: Applications

Section5.7: Application 7: Why Do Colleges Use Gpa,s Actss, And Sats, For Purposes Of Admission?

Problem 2ST

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