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Two-part tariff

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Two-part Tariff

A firm faces two consumers with the following demand functions:

p1(q1) = 400 − q1

p2(q2) = 300 − q2.

The firm’s constant marginal cost of production is, c = 50. The firm may charge an access fee and per unit price (that the consumers can choose not to pay).

a) What are the profit maximizing access fee and price?

b) On a pair of graphs, represent the two demand curves, marginal cost, the access fee, variable profit, and consumer surplus

Reference no: EM13831861

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