Question
Consider an electricity market where there are three suppliers, each with constant marginal cost (a reasonable approximation in electricity generation). Firm 1 has a capacity
Consider an electricity market where there are three suppliers, each with constant marginal cost (a reasonable approximation in electricity generation). Firm 1 has a capacity of 200 at MC = 5. Firm 2 has a capacity of 100 at MC = 8. Firm 3 has a capacity of 100 at MC = 10. Let's assume that the three firms are price takers (behave competitively).
What will be the industry (market) supply curve? Please draw a graph and write the equation.
What will be the competitive equilibrium price and quantity when the market demand is given by Q(P) = 1000/P0.5.
What will be the competitive equilibrium price and quantity when the market demand is given by Q(P) = 750/P0.5.
What will be competitive the equilibrium price and quantity when the market demand is given by Q(P) = 500/P0.5.
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