Question

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.

Answer #1

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 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. 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 = 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 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 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 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 = 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
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 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

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 2 minutes ago

asked 7 minutes ago

asked 57 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago

asked 3 hours ago

asked 3 hours ago