Consider the case of The Electric Company which produces electricity in New York State. The average...
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. (5 Points) In the case above, is this profit-maximizing outcome efficient? If not, calculate any deadweight loss. c. (5 Points) Suppose instead that the firm’s marginal cost curve is more complicated. The firm has two plants. The first plant has a constant marginal cost of 5 cents and can produce up to 20 mwh. The second plant has a constant marginal cost of 15 cents and can produce up to 10 mwh. Suppose also that the firm faces strongly seasonal demand such that in the summer months demand can be represented by P=70-Q and in the winter months demand can be represented by P=40-Q. How much will they produce in each season and what prices will they charge? [HINT: Carefully graphing this situation will be VERY HELPFUL]
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Consider the case of The Electric Company which produces
electricity in New York State. The average...
1. Consider the case of The Electric Company which produces electricity in New York State. The av...
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. c. Suppose instead that the firm’s marginal cost curve is more complicated. The firm has two plants. The first plant...
Suppose Madison Gas and Electric (MGE) is a natural monopoly for electricity. That is the case...
Suppose Madison Gas and Electric (MGE) is a natural
monopoly for electricity. That is the case where no firm can
produce the total quantity in a market more cheaply than multiple
firms because there is a large fixed cost or economies of scale in
this industry. The demand curve, average total cost curve, marginal
cost curve, and margin revenue for this firm are shown in the
picture below.
Homework 4_windoor - Word esign Layout References Mailings Review View Help T...
The Metro Electric Company produces and distributes electricity to residential customers in New Brunswick. The demand for...
The Metro Electric Company produces and distributes electricity to residential customers in New Brunswick. The demand for electricity is given by P = 0.04 – 0.01Q The resulting marginal revenue function is: MR = 0.04 – 0.02Q Metro’s marginal cost function is: MC = 0.005 + 0.0075Q where Q = millions of kilowatt hours and P = the dollars/kilowatt hour. If the mayor of New Brunswick wants to maximize surplus what price per month should she mandate that Metro charge? How...
Consider a market for electricity with aggregate inverse demand curve: p = 10 where p is...
Consider a market for electricity with aggregate inverse demand curve: p = 10 where p is the price of electricity in dollars per unit. The market demand curve is thus horizontal at a price of 10 Let e denote consumption of electricity. A single firm has variable production costs of: c(e) = 2 Fixed costs are zero. Assume that each unit of production generates a units of damages de): d(e) = ae Assume that a = 2 (1) Assume there's...
The Metro Electric Company produces and distributes electricity to residential customers in New Brunswick. The demand for...
The Metro Electric Company produces and distributes electricity to residential customers in New Brunswick. The demand for electricity is given by P = 0.04 – 0.01Q The resulting marginal revenue function is: MR = 0.04 – 0.02Q Metro’s marginal cost function is: MC = 0.005 + 0.0075Q What is the gain in surplus from regulating the Metro’s price and how much is the monopoly worth to Metro (i.e. how much will they spend lobbying the government not to regulate their price)?
Consider a monopoly (firm A) which produces and sells gadgets. The firm has been around for...
Consider a monopoly (firm A) which produces and sells gadgets. The firm has been around for along time, implying it has no fixed cost for the production. The inverse market demand function is: P= 14−Q, wherePis the price of gadgets, Q is total supply. Firm A’s marginal (and average-)cost for producing gadgets is 2. 1. Suppose now that a firm B considers entering the market. If it enters, the two firms decideabout production volumes simultaneously. Firm B has the same...
There are 10 households in Lake Wobegon, Minnesota, each with a demand for electricity of Q-60-P. Lake Wobegon Electric's (LWE) cost of producing electricity is TC 600 +Q. a. If the regulators of...
There are 10 households in Lake Wobegon, Minnesota, each with a demand for electricity of Q-60-P. Lake Wobegon Electric's (LWE) cost of producing electricity is TC 600 +Q. a. If the regulators of LWE want to make sure that there is no deadweight loss in this market, what price will they force LWE to charge? What will output be in that case? Calculate consumer surplus and LWE's profit with that price. fRound afl responses to two decimal places.) The regulated...
26. (8 points) Consider a monopolist who faces a constant average and marginal cost of $5...
26. (8 points) Consider a monopolist who faces a constant average and marginal cost of $5 and a linear demand curve of P = 20-20, where P is the price the monopolist charges and Q is the quantity consumers purchase. To obtain the optimal quantity and price, the monopolist needs to obtain the marginal revenue, which has the same intercept as the demand curve but twice as steep. Obtain the monopolist's marginal revenue, optimal output, and price.
26. (8 points) Consider a monopolist who faces a constant average and marginal cost of $5...
26. (8 points) Consider a monopolist who faces a constant average and marginal cost of $5 and a linear demand curve of P = 20-2Q, where P is the price the monopolist charges and Q is the quantity consumers purchase. To obtain the optimal quantity and price, the monopolist needs to obtain the marginal revenue, which has the same intercept as the demand curve but twice as steep. Obtain the monopolist's marginal revenue, optimal output, and price.
1. Consider a small isolated town with a single brewery with a the inverse demand curve...
1. Consider a small isolated town with a single brewery with a the inverse demand curve for beer -- p = 15 - 0.33QD. The brewery can produce beer at a constant marginal and average cost, MR = ATC = $1. What is the brewery's profit maximizing output (you may round)? 2. Consider a small isolated town with a single brewery with a the inverse demand curve for beer -- p = 15 - 0.33QD. The brewery can produce beer...
Suppose Madison Gas and Electric (MGE) is a natural
monopoly for electricity. That is the case where no firm can
produce the total quantity in a market more cheaply than multiple
firms because there is a large fixed cost or economies of scale in
this industry. The demand curve, average total cost curve, marginal
cost curve, and margin revenue for this firm are shown in the
picture below.
Homework 4_windoor - Word esign Layout References Mailings Review View Help T...
Consider a market for electricity with aggregate inverse demand curve: p = 10 where p is the price of electricity in dollars per unit. The market demand curve is thus horizontal at a price of 10 Let e denote consumption of electricity. A single firm has variable production costs of: c(e) = 2 Fixed costs are zero. Assume that each unit of production generates a units of damages de): d(e) = ae Assume that a = 2 (1) Assume there's...
There are 10 households in Lake Wobegon, Minnesota, each with a demand for electricity of Q-60-P. Lake Wobegon Electric's (LWE) cost of producing electricity is TC 600 +Q. a. If the regulators of LWE want to make sure that there is no deadweight loss in this market, what price will they force LWE to charge? What will output be in that case? Calculate consumer surplus and LWE's profit with that price. fRound afl responses to two decimal places.) The regulated...
26. (8 points) Consider a monopolist who faces a constant average and marginal cost of $5 and a linear demand curve of P = 20-20, where P is the price the monopolist charges and Q is the quantity consumers purchase. To obtain the optimal quantity and price, the monopolist needs to obtain the marginal revenue, which has the same intercept as the demand curve but twice as steep. Obtain the monopolist's marginal revenue, optimal output, and price.
26. (8 points) Consider a monopolist who faces a constant average and marginal cost of $5 and a linear demand curve of P = 20-2Q, where P is the price the monopolist charges and Q is the quantity consumers purchase. To obtain the optimal quantity and price, the monopolist needs to obtain the marginal revenue, which has the same intercept as the demand curve but twice as steep. Obtain the monopolist's marginal revenue, optimal output, and price.
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