In our discussion of Figure 12.4, we assumed that the monopoly engaged in block-pricing by setting both block prices so that they were on the demand curve. However, suppose the monopoly sets the first block at 20 units but can choose a first-block price that is greater than $70. It then allows consumers to buy as many additional units as they want at $30 per unit. Can the monopoly choose a price for the first block such that consumers are willing to buy 60 units, the monopoly captures the entire potential surplus, and society does not suffer a deadweight loss? If so, what is the first-block price?Figure 12.4
In our discussion of Figure 12.4, we assumed that the monopoly engaged in block-pricing by setting both block prices so that they were on the demand”
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