Use the graphs below to explain the differences between standard monopoly pricing and two-part pricing. 10...

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Use the graphs below to explain the differences between standard monopoly pricing and two-part pricing.

10 10 MC AC MC-AC 8 10Q 4 10 MR View as Text Download»

business economics

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Answer 1

Answer #1

In the two part pricing the firm will set a entry fee and a price to use the goods and service

The firm will set MC=MR in the first graph when it charges a single price,at which quantity is 4 and price is 6

When the monopolist charges two part pricing,it will set a fixed fee equal to the consumer surplus in the second graph where CS = 0.5*8*(10-2) = 32 so the fixed fee is 32 and a price of the good at which P=MC=2.

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Answer 2

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Use the graphs below to explain the differences between standard monopoly pricing and two-part pricing. 10...

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