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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.

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?

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