A Firm Has Two Customers with Non-Identical Demands and a Constant

Multiple Choice

A firm has two customers with non-identical demands and a constant marginal cost of production. At any positive price, the consumer surplus values for the two customers are related as CS₂ ≥ CS₁ . What can we say about the optimal two-part tariff for the firm?

A) The firm sets the price equal to MC and the optimal tariff is equal to CS₂.
B) The firm sets the price equal to MC and the optimal tariff is equal to CS₁.
C) The firm sets the price equal to MC and the optimal tariff is equal to zero.
D) The optimal price is greater than MC and the optimal tariff is equal to CS₁.