Describe what is a two-part tariff

Reference no: EM132420045

Assignment: 1. What are the key conditions that must be present for a firm to successfully price discriminate? What are two different examples of price discrimination being practiced today?

2. What is a two-part tariff? Why do firms sometimes use them? What is an example of a firm that uses a two-part tariff as part of its pricing strategy?

3. George has a monopoly on burrito sales in a small town in Kansas. The burritos cost him a constant $5 each to produce. He faces following demand schedule for his product: (please look at image)

a. Under normal monopoly conditions, how many burritos should he produce, what price should he charge, and how much profit can he expect to make?

• Draw a graph under these assumptions showing (and calculating) producer surplus, consumer surplus, economic surplus and deadweight loss.

b. If George was able to engage in perfect price discrimination, how many burritos would he produce, what would his total revenue be, and how much profit would he earn?

• Draw a graph under these assumptions showing (and calculating) producer surplus, consumer surplus, economic surplus and deadweight loss.

c. Is society better off by allowing George to perfectly price discriminate? Defend your answer.

Price	Quantity Demanded
$30	0
$25	1
$20	2
$15	3
$10	4
$5	5
$0	6

Reference no: EM132420045

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