Problem
Consider a market with 100 identical individuals, each with the demand schedule for electricity of P = 10 Q. They are served by an electric utility that operates with a fixed cost 1,200 and a constant marginal cost of 2. A regulator would like to introduce a two-part tariff, where S is a fixed subscription charge and m is a usage charge per unit of electricity consumed. How should the regulator set S and m to maximize the sum of consumer and producer surplus while allowing the firm to earn exactly zero economic profit?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.