Question

Sole Power Generating Ltd (SPC) is electricity generating firm, and it is the only electric power generating company the state. The market demand for electricity is estimated as:

Qd = 1,700 – 20P and the market supply for the electricity is Qs = - 400 + 40P.

Where: Q = Quantity of energy in kilowatt produced per day (in thousands) P = Price per kilowatt in Naira

a) Calculate the Monopoly’s equilibrium price and quantity. (5 points)

b) Calculate the equilibrium price and quantity that would prevail under a perfect market condition. (5 points)

c) Calculate the welfare loss to the society resulting from the monopoly power. (5 points)

d) Show your results from parts (a), (b), and (c) on a graph. (5 points)

Answer 1

a) at Monopoly &m MR- MC IO 0 40 To '46 b) Perfect Compte ma 8loo 60 P dooo

C) uoetfone loss- วุโ55-25]1000-6001 5x 30X 400 13,000 =6000 85 と P 55 35 25 deadut lo8s Peofest Compr MR 850