A firm using a two-part tariff faces a tradeoff because
A) any increase in consumer surplus must be offset by a decrease in producer surplus.
B) the only way to increase the fixed-fee portion of the price is to lower the per-unit portion of the price.
C) the only way to increase total revenue is to lower per-unit profit.
D) the smaller the variation between the parts of the price, the greater the deadweight loss generated by the pricing scheme.
B
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For the United States, Lorenz curves show that
A) income is more equally distributed than wealth. B) income is less equally distributed than wealth. C) incomes have increased over time. D) blacks and Hispanics became better off in the 1990s.
At Revolution Doughnuts in Fort Collins, Colorado, a cup of coffee or a doughnut is $1. Suppose Hannah loves going to Revolution Doughnuts. She spends $5 a day at the shop on 3 doughnuts and 2 cups of coffee. Is Hannah maximizing her total utility?
A) No. B) Maybe, but I need to know more about Hannah's income. C) Yes. D) Maybe, but I need to know more about Hannah's marginal utility per dollar for each of the two goods.