Question
The monthly demand equation for an electric utility company is estimated to be p=86(10^-5)x, where p is measured in dollars and x is measured in
The monthly demand equation for an electric utility company is estimated to be p=86(10^-5)x, where p is measured in dollars and x is measured in thousands ofkillowatt-hours. The utility has fixed costs of $3,000,000 per month and variable costs of $48 per 1000kilowatt-hours of electricitygenerated, so the cost function is C(x)=3106+48x.
(a) Find the value of x and the corresponding price for 1000kilowatt-hours that maximize theutility's profit.
(b) Suppose that the rising fuel costs increase theutility's variable costs from $48 to $58, so its new cost function is C1(x)=3106+58x. Should the utility pass all this increase of $10 per thousandkilowatt-hours on to theconsumers?
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