Consider a wholesale electric power market where 1 nuclear power plant, 1 coal plant, and 2 natural gas plants supply power. The nuclear power plant can supply 100 megawatt-hours (MWh) per hour, the coal plant can supply 80 MWh, and each natural gas plant can supply 60 MWh. The marginal cost of the nuclear power plant is equal to $10, MCN = 10. Similarly, MCC = 12 and MCG = 15.
Demand fluctuates between off-peak (L) and peak (H) demand as follows:
DL : P = 87 - 1/2Q
DH : P = 112 - 1/2Q
a. Draw a graph of this market with the supply curve and both demand curves, and determine the equilibrium in both off-peak and peak hours.
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