What is the largest fixed fee that a consumer would pay

Reference no: EM13240035

Assume a natural monopoly with total costs C=500 20Q. Market demand is Q=100-P. a) Suppose that average cost pricing is employed. Find price, output, and the deadweight loss. b) Now consider two-part pricing. Each consumer must pay a fixed fee regardless of consumption level plus a price per unit. Assume that the market consists of ten consumers with identical demand curves for the product. If the price is set equal to marginal cost, what is the largest fixed fee that a consumer would pay for the right to buy at that price? What fixed fee would permit the monopolist to break even? What is the deadweight loss?

Reference no: EM13240035

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