Question

Consider a market for electricity with 18MW of generation capacity available at MC = 4 and...

Consider a market for electricity with 18MW of generation capacity available at MC = 4 and 20MW of generation capacity available at MC = 16. The off-peak demand is given by Q = 20−P, and the peak demand is given by Q = 32 − P.

a. Construct the supply curve and draw a graph of it.

b. If the market is competitive, what are the peak and off-peak equilibrium prices and quantities?

c. At those prices, what is the total revenue being earned across all of the firms in this market?

d. Now suppose that this is a regulated market and all supply is provided by a single firm. Regulation requires that they charge a single weighted-average price in the two markets. What is that price?

e. At that price, what is the firm’s revenue? What does that imply that the firm’s fixed cost must be if the firm is earning a normal rate of return?

f. What is the deadweight loss associated with using averaged pricing rather than peak-load pricing?

g. Draw a graph of your answers.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider the market for electricity in New York State. Suppose that the demand for electricity is...
Consider the market for electricity in New York State. Suppose that the demand for electricity is given by Q=16-0.2P (P=80-5Q) where Q is measured in billions of kwh and P is measured in cents. The marginal cost of producing electricity in NYS is MC=5+Q. If the electricity industry is perfectly competitive, what is the equilibrium price and quantity of electricity? Graph this. If instead there are a small number of firms who are able to collude in this market, what...
Consider the market for electricity in New York State. Suppose that the demand for electricity is...
Consider the market for electricity in New York State. Suppose that the demand for electricity is given by Q=16-0.2P (P=80-5Q) where Q is measured in billions of kwh and P is measured in cents. The marginal cost of producing electricity in NYS is MC=5+Q. Suppose that there are three firms in this market who are competing on the wholesale market by choosing prices (Bertrand Competition). Firm 1 has a MC=15, Firm 2 has a MC=12, and Firm 3 has a...
Q2. MC versus AC pricing Suppose that inverse demand facing a monopolist is given by P=100-10Q....
Q2. MC versus AC pricing Suppose that inverse demand facing a monopolist is given by P=100-10Q. Suppose further that TC can be approximated by TC=10Q+140. It should be clear that AC is falling in output. This gives the regulator a dilemma. They can set prices=ac (to insure the firm is viable) or they can set prices=mc and subsidize the firm to make sure it is viable. For a and, graph the result. a. What are market outcomes (P, Q) if...
1. Consider a monopolist where the market demand curve for the produce is given by P...
1. Consider a monopolist where the market demand curve for the produce is given by P = 520 - 2Q. This monopolist has marginal costs that can be expressed as MC = 100 + 2Q and total costs that can be expressed as TC = 100Q + Q2 + 50. (Does not need to be done. Only here for reference) 2. Suppose this monopolist from Problem #1 is regulated (i.e. forced to behave like a perfect competition firm) and the...
Consider a perfectly competitive market in the short-run with the following demand and supply curves, where...
Consider a perfectly competitive market in the short-run with the following demand and supply curves, where P is in dollars per unit and Q is units per year: Demand: P = 500 – 0.8Q Supply: P = 1.2Q Calculate the short-run competitive market equilibrium price and quantity. Graph demand, supply, and indicate the equilibrium price and quantity on the graph. Now suppose that the government imposes a price ceiling and sets the price at P = 180. Address each of...
The market demand curve is P = 90 − 2Q, and each firm’s total cost function...
The market demand curve is P = 90 − 2Q, and each firm’s total cost function is C = 100 + 2q2. Suppose there is only one firm in the market. Find the market price, quantity, and the firm’s profit. Show the equilibrium on a diagram, depicting the demand function D (with the vertical and horizontal intercepts), the marginal revenue function MR, and the marginal cost function MC. On the same diagram, mark the optimal price P, the quantity Q,...
2. Suppose this market segment was supplied by a competitive market rather than a single firm...
2. Suppose this market segment was supplied by a competitive market rather than a single firm with monopoly power. demand equation is given by P(q) = 10 –q. Its total cost of producing its output is given by the function TC(q) = (q2/8) + q+ 16, Then the demand curve would be the market demand curve, and the marginal cost equation MC(q) = (q/4) + 1. would represent the competitive market supply curve. a.If this were a competitive market, what...
Suppose the inverse demand for a product produced by a single firm is given by P...
Suppose the inverse demand for a product produced by a single firm is given by P = 200 ? 5Q and that for this firm MC = 20 + 2Q. a) ) If the firm cannot price-discriminate, what are the profit-maximizing price and level of output? b) If the firm cannot price-discriminate, what are the levels of producer and consumer surplus in the market? What is the deadweight loss? Both compute and illustrate each on a graph. c) If the...
Consider the following total cost function for an individual firm: C(q) = 10+ q + (1/4)q^2...
Consider the following total cost function for an individual firm: C(q) = 10+ q + (1/4)q^2 The industry demand is estimated to be: Q = 100 - P 1) Now suppose there is a monopolist facing the industry demand. Write down the monopolist's pro t function. 2) What is the equation of the monopolists marginal revenue function? Also, explain how the monopolist's marginal revenue function differs from the marginal revenue function of a firm in a long-run perfectly competitive market....
1. Consider the case of The Electric Company which produces electricity in New York State. The...
1. Consider the case of The Electric Company which produces electricity in New York State. The average monthly demand curve for the firm can be represented by P=65-Q where Q represents the quantity of electricity produced, in megawatt-hours (mwh) and P is measured in cents. Their marginal costs can be represented by MC=5+0.5*Q. Please provide graphs to accompany your analysis. a. (5 Points) The firm has market power. What price should they charge? How much electricity will they produce? b....
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT