Question

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.

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.
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...

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. The firm has market
power. What price should they charge? How
much electricity will they produce?

Suppose that demand for electricity is given by
P(Q)=400-Q
where Q is the quantity kilowatt hours demanded and P is the
price of electricity. The marginal private cost of electricity
production is:
MC(Q)=100+.5Q
Assume that electricity production exposes an external cost on
society of 30 per kWh. There are no marginal external benefits from
the consumption or production of electricity.
1. Find the efficiency quantity of electricity
2. Find the efficient price per kWh of electricity
3. Calculate the deadweight...

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....

Suppose that demand for electricity is given by P= 400 -(Q) ,
where Q is the quantity kilowatt hours demanded and
P is the price of electricity. The marginal private cost
of electricity production is: MC(Q) = 100 +1/2Q . Assume that
electricity production exposes an external cost on society of
$30 per kWh. There are no marginal external
benefits from the consumption or production of electricity.
1. Find the efficiency quantity of electricity.
2. Find the efficient price per...

Competitive
Market Equilibrium. Syracuse Paper supplies
printer paper in upstate New York. Like the output of other
wholesale distributors, Syracuse Paper must meet strict guidelines
and the printer paper supply
industry can be regarded as perfectly
competitive. Total and marginal cost relations
are:
TC = $3,600 + $5Q +
$0.01Q2
MC = TC/Q = $5 +
$0.02Q
where Q is cases of
printer paper per day.
A.
Calculate the firm's optimal
output and profits if prices are stable at $20...

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.
Suppose instead that the firm’s
marginal cost curve is more complicated. The firm has two plants.
The first plant has a constant marginal...

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...

Assume that the manufacturing of barbie doll is a perfectly
competitive industry. The market demand for barbie doll is
described by a linear demand
function :Qd = 6000 – 50P ; P =
price of a barbie doll.
9 There
are fifty manufacturers of barbie dolls. Each manufacturer has the
same
production costs given as TC(q) = 100 +q2 + 10q ; q =
quantity of barbie doll. Show that a firm in this industry maximizes profit by
producingq = (P -10)...

Consider a closed economy. Suppose the market for corn in banana
republic is competitive. The domestic market demand function for
corn is Qd=18 -P and the domestic market supply function is Qs=P-2,
both measured in billions of bushels per year. In order to help the
corn industry, the government initiated a price support program by
purchasing 2 billion bushels corn in the market.
a) draw a graph to show the new market equilibrium
price and quantity without calculating the number....

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