ECONOMICS 5020 - Electricity distribution in upstate New York
Electricity distribution in upstate New York is provided by only one firm, NYSEG. Demand for electricity is characterized by, and NYSEG has a total cost function, and a marginal cost function.
a. (5 points) What is NYSEG’s marginal revenue equation?
b. (5 points) Draw the market for electricity, making sure include Demand (D), Marginal Revenue (MR), Marginal Cost (MC) curves on the graph. Indicate the quantity and price that NYSEG will choose.
c. (5 points) What is the quantity and price NYSEG will choose? Show your math for full credit.
d. (5 points) How does the price compare to the average cost of production at the optimal level of production?
e. (5 points) What is the barrier that allows for NYSEG to operate as a monopoly? Explain briefly.
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Solution: ECONOMICS 5020 - Electricity distribution in upstate New York