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A coal-fired power plant can produce electricity at a variable cost of $0.04 per kilowatt-hour when running at its full capacity of 30 megawatts per hour, $0.16 per kilowatt-hour when running at 20 megawatts per hour, and $0.24 per kilowatt-hour when running at 10 megawatts per hour. A gas-fired power plant can produce electricity at a variable cost of $0.12 per kilowatt-hour at any capacity from 1 megawatt per hour to its full capacity of 5 megawatts per hour. The cost of constructing a coal-fired plant is $60 million, but it costs only $12 million to build a gas-fired plant. Instructions: In part b, enter your answer as a whole number. In parts c and d, round your answers to 2 decimal places. a. Consider a city that has a peak afternoon demand of 80 megawatts of electricity. If it wants all plants to operate at full capacity, what combination of coal-fired plants and gas-fired plants would minimize construction costs? O 2 coal-fired plants and 4 gas-fired plants O 16 gas-fired plants O1 coal-fired plant and 10 gas-fired plants b. How much will the city spend on building that combination of plants? 2$ |million c. What will be the average variable cost per kilowatt-hour if you average over all 80 megawatts that are produced by that combination of plants? (Hint. A kilowatt is one thousand watts, and a megawatt is one million watts.) 2$ per kilowatt-hour d. What would be the average variable cost per kilowatt-hour if the city had instead built three coal-fired plants? 2$ per kilowatt-hour

A coal-fired power plant can produce electricity at a variable cost of $0.04 per kilowatt-hour when running at its full capacity of 30 megawatts per hour, $0.16 per kilowatt-hour when running at 20 megawatts per hour, and $0.24 per kilowatt-hour when running at 10 megawatts per hour. A gas-fired power plant can produce electricity at a variable cost of $0.12 per kilowatt-hour at any capacity from 1 megawatt per hour to its full capacity of 5 megawatts per hour. The cost of constructing a coal-fired plant is $60 million, but it costs only $12 million to build a gas-fired plant. Instructions: In part b, enter your answer as a whole number. In parts c and d, round your answers to 2 decimal places. a. Consider a city that has a peak afternoon demand of 80 megawatts of electricity. If it wants all plants to operate at full capacity, what combination of coal-fired plants and gas-fired plants would minimize construction costs? O 2 coal-fired plants and 4 gas-fired plants O 16 gas-fired plants O1 coal-fired plant and 10 gas-fired plants b. How much will the city spend on building that combination of plants? 2$ |million c. What will be the average variable cost per kilowatt-hour if you average over all 80 megawatts that are produced by that combination of plants? (Hint. A kilowatt is one thousand watts, and a megawatt is one million watts.) 2$ per kilowatt-hour d. What would be the average variable cost per kilowatt-hour if the city had instead built three coal-fired plants? 2$ per kilowatt-hour

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter8: Cost Analysis
Section: Chapter Questions
Problem 5E
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A coal-fired power plant can produce electricity at a variable cost of $0.04 per kilowatt-hour when running at its full capacity of 30 megawatts per hour, $0.16 per kilowatt-hour when running at 20 megawatts per hour, and $0.24 per kilowatt-hour when running at 10 megawatts per hour. A gas-fired power plant can produce electricity at a variable cost of $0.12 per kilowatt-hour at any capacity from 1 megawatt per hour to its full capacity of 5 megawatts per hour. The cost of constructing a coal-fired plant is $60 million, but it costs only $12 million to build a gas-fired plant. Instructions: In part b, enter your answer as a whole number. In parts c and d, round your answers to 2 decimal places. a. Consider a city that has a peak afternoon demand of 80 megawatts of electricity. If it wants all plants to operate at full capacity, what combination of coal-fired plants and gas-fired plants would minimize construction costs? 2 coal-fired plants and 4 gas-fired plants 16 gas-fired plants 1 coal-fired plant and 10 gas-fired plants b. How much will the city spend on building that combination of plants? 2$ million c. What will be the average variable cost per kilowatt-hour if you average over all 80 megawatts that are produced by that combination of plants? (Hint. A kilowatt is one thousand watts, and a megawatt is one million watts.) per kilowatt-hour d. What would be the average variable cost per kilowatt-hour if the city had instead built three coal-fired plants? per kilowatt-hour %24
Transcribed Image Text:A coal-fired power plant can produce electricity at a variable cost of $0.04 per kilowatt-hour when running at its full capacity of 30 megawatts per hour, $0.16 per kilowatt-hour when running at 20 megawatts per hour, and $0.24 per kilowatt-hour when running at 10 megawatts per hour. A gas-fired power plant can produce electricity at a variable cost of $0.12 per kilowatt-hour at any capacity from 1 megawatt per hour to its full capacity of 5 megawatts per hour. The cost of constructing a coal-fired plant is $60 million, but it costs only $12 million to build a gas-fired plant. Instructions: In part b, enter your answer as a whole number. In parts c and d, round your answers to 2 decimal places. a. Consider a city that has a peak afternoon demand of 80 megawatts of electricity. If it wants all plants to operate at full capacity, what combination of coal-fired plants and gas-fired plants would minimize construction costs? 2 coal-fired plants and 4 gas-fired plants 16 gas-fired plants 1 coal-fired plant and 10 gas-fired plants b. How much will the city spend on building that combination of plants? 2$ million c. What will be the average variable cost per kilowatt-hour if you average over all 80 megawatts that are produced by that combination of plants? (Hint. A kilowatt is one thousand watts, and a megawatt is one million watts.) per kilowatt-hour d. What would be the average variable cost per kilowatt-hour if the city had instead built three coal-fired plants? per kilowatt-hour %24
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