207k views
5 votes
A two part tariff pricing scheme maximizes consumer surplus when consumers are identical

True.
False.

User Msporek
by
7.4k points

1 Answer

7 votes

Final answer:

A two-part tariff pricing scheme does not maximize consumer surplus when consumers are identical; it is false. This pricing strategy actually allows the monopolist to capture all the consumer surplus, leaving none for consumers, similar to perfect price discrimination.

Step-by-step explanation:

The statement that a two-part tariff pricing scheme maximizes consumer surplus when consumers are identical is false. The two-part tariff is a pricing strategy that includes a fixed fee, and a variable fee based on consumption. In a two-part tariff, the monopolist aims to capture the maximum willingness to pay by charging an initial access fee (the first part), and then a per-unit price (the second part).

In the scenario of identical consumers, a two-part tariff would actually extract all the consumer surplus, as consumers would each pay exactly their maximum willingness to pay. The result is that the monopolist captures all the consumer surplus, leaving none for the consumers.