Suppose a firm sells its products to identical consumers and each of them has the following demand for its product: P=40-Q. Further assume that the marginal cost to produce the product is $5. The firm is thinking of implementing the two part pricing technique: charge consumers an “entrance” fee and then charge $5 per each unit the consumers consume. Under this scenario, what should be the “entrance” fee for each consumer? what would be the producer surplus per each customer?
Multiple choice answer selection: ($1225, 40, 612.50, 35, 1225.50)
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