Consider a wholesale electricity market withtwo types of generators: coal plants andnatural gas plants. There are 10 generatorsfor each fuel type. Each generator has acapacity of 1,000 MW. Marginal costs varyacross generation types: $10 per MWh forcoal and $20 per MWh for natural gas.During peak hours, demand is given by Q =30,000 – 100P (measured in MWh). Duringsemi- peak hours, demand is given by Q =22,000 – 100P. During off-peak hours,demand is given by Q = 20,000 – 100P.Assume that a day consists of one off-peakhour and either a semi-peak or a peak hour(so a day contains two hours only!).Probabilities of semi-peak vs. peak hoursare 50%- 50%. For now, assume that themarket is competitive.Calculate the peak, the semi-peak, and theoff-peak prices of electricity.What are the expected daily profits for eachplant?

2 types of generators in a competitive market Type 1: Coal Plant Number of generators = 10 Capacity…

Answered: Consider a wholesale electricity market…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter9: Monopoly

Section: Chapter Questions

Problem 31P: Return to Figure 9.2. Suppose P0 is 10 and P1 is 11. Suppose a new firm with the same LRAC curve as...

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