Explain why a monopoly that knows the demand curve of identical consumers can set a two-part tariff with the lump sum tariff equal to the total amount of potential consumer surplus
What will be an ideal response?
The producer wants to set the lump sum tariff equal to the competitive level of consumer surplus. This maximizes the producer surplus. The consumer surplus measures the difference between the consumer's value of the good and the price paid for each unit. Thus, the consumers are willing to pay up to the total amount of consumer surplus.
You might also like to view...
A tax on interest income could be efficient even if it leads to a decrease in savings.
Answer the following statement true (T) or false (F)
Which of the following statements is correct?
a. A tax levied on buyers will never be partially paid by sellers. b. Who actually pays a tax depends on the price elasticities of supply and demand. c. Government can decide who actually pays a tax. d. A tax levied on sellers always will be passed on completely to buyers.
Suppose the MC Hammer Company produces hammers. The number of hammers it can produce each hour depends on the number of workers it hires, as shown in the accompanying table. In addition, each hammer can be sold for $2 more than the cost of the materials needed to produce it.Number of workers per hourNumber of hammers per hour00120236348456560 If the hourly wage for people who make hammers is $17 per hour, then how many workers should the MC Hammer Company hire each hour?
A. 2 B. 1 C. 3 D. 4
The exchange rate increases when there is a decrease in the demand for bonds.
a. true b. false