industry economic question

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The question was based on the two-part tariff example that we discussed in class. I asked, if the maximum profit of the seller is $160, how may the seller achieve it?

For those of you who are interested in the question, the seller can use the following pricing scheme:

Option 1: A fixed fee of $32 and a unit price of $4;

Option 2: A fixed fee of $96 and a unit price of $0.

Here option 1 is targeted at the household consumer and option 2 the business consumer. You can verify that if the household consumer chooses option 2, the consumer surplus will be negative; if the business consumer chooses option 1, the consumer surplus will be 4, which is not different from what she gets from option 2. So one consumer is happier with the proposed option, and the other is indifferent between the two. It is good enough for them to identify themselves.