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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 will be the equilibrium price and quantity in this market? If there is deadweight loss associated with this collusion, calculate it. Graph this.

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