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.

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 MC=12. What is the equilibrium price and quantity in this case? What are the profits for each firm?

Suppose again that the firms are competing on price (Bertrand Competition), but that Firm 1 MC=15, Firm 2 MC=15, and Firm 3 MC=12. What is the equilibrium price and quantity in this case? What are the profits for each firm?

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 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 market demand for golf balls is described by Q = 90
− 3P, where Q is measured in kilos of balls. There are two firms
that supply the market.
Firm 1 can produce a kilo of balls at a constant unit cost of $15
whereas firm 2 has a constant unit cost equal to $10.
a)Suppose the firms compete in quantities. How much does each firm
sell in a Cournot equilibrium? What is the market price and what...

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....

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...

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...

Question 3 Suppose that the market demand curve for golf balls
is described by Q = 90 – 3P where Q is measured in kilos of balls.
There are 2 firms that supply the market. Suppose first that golf
balls produced by the 2 firms are identical. Firm 1 can produce a
kilo of balls at a constant unit cost of $15 whereas firm 2 has a
constant unit cost of $10. (a) Suppose firms compete in quantities.
How much...

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...

Suppose that two firms compete in the same market producing
homogenous products with the following inverse demand function:
P=1,000-(Q1+Q2)
The cost function of each firm is given by:
C1=4Q1
C2=4Q2
Suppose that the two firms engage in Bertrand price
competition. What price should firm 1 set in equilibrium? What
price should firm 2 set? What are the profits for each firm in
equilibrium? What is the total market output?
Suppose that the two firms collude in quantity, i.e.,
acting together...

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