The Lizard Lounge is well known for its exotic cocktails. Figure 16-7 shows its
ID: 1173449 • Letter: T
Question
The Lizard Lounge is well known for its exotic cocktails. Figure 16-7 shows its estimated demand curve for cocktails.
Refer to Figure 16-7. The owners of the Lizard Lounge are considering the following four pricing options:
a. A single price scheme where the cocktail price equals the monopoly price.
b. A single price scheme where the cocktail price equals the competitive price.
c. A two-part tariff: a monopoly price for cocktails and a cover charge that will generate total revenue equal to the area X.
d. A two-part tariff: a competitive price for cocktails and a cover charge that will generate total revenue equal to the area X + Y + Z.
Under which scheme are the Lounge customers best off?
a) scheme a
b) scheme b
c) scheme c
d) scheme d
Figure 16-7 Price and cost per cocktail Marginal cost- average cost Marginal Revenue Demand Quantity of cocktailsExplanation / Answer
Under which scheme are the Lounge customers best off?
a) scheme a
b) scheme b
c) scheme c
d) scheme d
Answer is B
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