What is the two-part tariff it charges

Reference no: EM132208267

Question: 1. Consider a monopolist with a fixed cost of 500 and MC- 10 per unit. Demand in the market is P- 110 - q.

a. If the monopolist charges a linear price (the same price to all consumers) what is its price, quantity and profit? What is the DWL?

b. If the demand curve represents the demand for an individual consumer, if the monopolist can engage in first-degree price discrimination, what is the two-part tariff it charges? What is the resulting DWL?

c. Now again reconsider the monopolist charges a linear price (no price discrim ination). The government decides to impose a per-unit tax of S20. What is the resulting output and price the consumers pay? What is the monopolist's profit now that there is the tax imposed in the industry, and what is the DWL? Explain your answer, relative to part a. What is the tax revenue generated?

d. Can you suggest an alternative way the government can raise the same tax revenue in which there is less DWL than in part (c)?

Reference no: EM132208267

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