Question
Consider a small electricity market with one large firm, GenPower, and many small firms. GenPower owns 3,000 MW of natural gas. It has a marginal
Consider a small electricity market with one large firm, GenPower, and many small firms. GenPower owns 3,000 MW of natural gas. It has a marginal cost of$18/MWh.The small firms supply electricity at marginal cost and are described by the following table.
Technology Capacity Marginal cost($/MWh)
Solar 500 0
Coal 1,000 20
Natural gas 2,000 25
(a) (4 points) Carefully draw the supply curve for the small firms.
(b) (5 points) Suppose demand is 3,000 MW. Carefully draw GenPower's residual demand curve. Is GenPower pivotal?
(c) (3 points) Find GenPower's profit-maximizing price and quantity.
(d) (3 points) In one sentence, what is real-time pricing?
(e) (4 points) How would you expect a shift to real-time pricing to affect the market demand curve, residual demand curve, and GenPower's markup?1Explain (you do not need to draw the picture).
(f) (2 points) Suppose you are working for a utility. Your employer is disappointed with the number of customers who choose to enroll in its real-time pricing program. What is an inexpensive way to significantly increase enrollment in the program
atleast first four parts...
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