Question
ConsiderthefollowingexcerptfromtheAlcanarticleinAppendix[1]: The [Alcan] shutdowns surprised many analysts because the company's smelters particularly those in Quebec rank among the world's lowest-cost producers. Alcan generates nearly all
ConsiderthefollowingexcerptfromtheAlcanarticleinAppendix[1]:
The [Alcan] shutdowns surprised many analysts because the company's smelters particularly those in Quebec rank among the world's lowest-cost producers. Alcan generates nearly all its ownhydroelectricpowerinQuebec,allowingittorunolderandlessefficientsmeltersprofitably.
However,Mr.DubucsaidAlcan'sreservoirsforthehydropowerarenowhalftothree-quarters full, and the company has to buy power from Hydro-Qubec just to maintain production.
"Wearestuckwithalackofenergy,"Mr.Dubucsaid."Itdoesnotmakesenseto buyfrom Hydro."
SoAlcan'ssmeltersarelow-costwhentheymaketheirownelectricitybuthigh-costwhenthey have to buy electricity from Hydro-Quebec.
Whatcostconceptsuggeststhatitmightbe wrongtoconcludethatAlcan'sin-housegeneration of electricity gives them low costs? (2pts)
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