The input-output curve of a gas-fired generating unit is approximated by the following function: H(P) = 120 +9.3 P + 0.0025 P² MJ/h This unit has a minimum stable generation of 200 MW and a maximum output of 500 MW. The cost of gas is 1.20 $/MJ. Over a 6-h period, the output of this unit is sold in a market for electrical energy at the prices shown in the table below.
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- Has the natural gas revolution in the United States made coal-fired power plants more or less profitable? Why or why not?9. Assume a constant marginal cost of $0.01/kwh for hydro and $0.09/kwh for natural gas given installed capacity. Assume that installed capacity can be bought at the beginning of the year and sold at the end of the year at the same price and that the discount rate or interest rate is 8.76% and that there are 8760 hours in a year. A kilowatt of natural gas capacity costs $1000 and a kilowatt of hydro capacity costs $10,000. Because you can buy and sell the capacity at the same price this means that the fixed cost of installed capacity is just the opportunity cost of capital, or the interest rate times the purchase price of the capacity.a. What is the average total cost of producing 8760 kilowatt hours in a year using one kilowatt of installed hydro capacity?b. What is the average total cost of producing 8760 kilowatt hours in a year using one kilowatt of installed natural gas capacity?ACME Coal paid $5,000 to lease a railcar from the Reading Railroad. Under the terms of the lease, $1,000 of this payment is refundable if the railcar is returned within two days of signing the lease. 1. Upon signing the lease and paying $5,000, how large are ACME’s fixed costs? Its sunk costs? 2. One day after signing the lease, ACME realizes that it has no use for the railcar. A farmer has a bumper crop of corn and has offered to sublease the railcar from ACME at a price of $4,500. Should ACME accept the farmer’s offer?
- A manufacturing company leases a building for $100,000 per year for its manufacturing facilities. In addition, the machinery in this building is being paid for in installments of $20,000 per year. Each unit of the product produced costs $15 in labor and $10 in materials. The product can be sold for $40. Use this information to solve, If the selling price is lowered to $35 per unit, how many units must be sold each year for the company to earn a profit of $60,000 per year? (a) 12,000 (b) 10,000 (c) 16,000 (d) 18,000 (e) 5,143. Select the closest answer.1. The amount of fixed factory costs applied to the product during the first 6 months under absorption costing is? A. Over-applied by $20,000. C. Under-applied by $40,000. B.Equal to the fixed costs incurred. D. Under-applied by $80,000. 2. Reported net income (or loss) for the first 6 months under absorption costing is? A. $160,000 B. $0 C. $40,000 D. $(40,000) 3. Reported net income (or loss) for the first 6 months under variable costing is? A. $180,000 B. $40,000 C. $0 D. $(180,000)A firm faces the following costs: total cost of capital = $1,000; price paid for labor = $12 per labor unit; and price paid for raw materials = $4 per raw-material unit. a. Suppose the firm can produce 5,000 units of output this year by combining its fixed capital with 100 units of labor and 450 units of raw materials. What are the total cost and average total cost of producing the 5,000 units of output? b. Now assume the firm improves its production process so that it can produce 6,000 units of output this year by combining its fixed capital with 100 units of labor and 450 units of raw materials. What are the total cost and average total cost of producing the 6,000 units of output? c. If units of output can always be sold for $1 each, then by how much does the firm’s profit increase after it improves its production process? d. Suppose that implementing the improved production process would require a one-time-only cost of $1,100. If the firm only considers this year’s profit, would…
- A. Will you invest a project that requires a $ 200,000 today and returns $50,000 at the end of the first year, $70,000 at the end of the second year and $100,000 at the end of the third year? Assume a discount rate of 5%. . B. An economist estimated that the total cost function of a single - product firm is TC= 125+5Q+3.5Q^2. Determine the average variable cost (AVC) of producing the 5 units. C. An economist estimated that the total cost function of a single -production firm is TC=125+5Q+3.5Q^2. Determine the marginal cost (MC) of producing the 5th unit? No derivative is required for this questionGiven that the marginal cost of a ‘backstop’ (e.g. solar energy) is MCb per unit of an exhaustible resource, prove that the cost of the ‘backstop’ sets an upper limit on oil price and also determines the initial price of oil. (Hint:Utilize the expression pt = MC + (p0 − MC)(1 + r)t and consider T as theswitch date.)If a firm has TFC = $500, and TC = $800 when output is 20 units, how much is the AVC per unit of output? a. $16 b. $25 c. $15 d. $65
- The cost, in millions of dollars, of building a three-story high school in NewYork State was estimated to be: 2C x x x x 1.7 0.14 0.0001 20 400where x is the number of thousands of square feet. Suppose that you arecontemplating building a for-profit three-story high school and estimate thatyour total revenue will be $0.2 million dollars per thousand square feet.(a) What is minimum area for a three-story high school in New YorkState, that this model covers? (b) What is the variable cost of building a three-story high school in NewYork State? (c) What is the fixed cost of building a three-story high school in NewYork State? (d) Determine the profit function,P x( ), for building a three-story highschool in New York State? . (e) Determine,P(250) , for building a three-story high school in New YorkState, and interpret the result. (f) How many thousands of square feet should a three-story high schoolbuilding in New York State be in order to break even?In 2012–2015, the price of jet and diesel fuel used by air freight companies decreaseddramatically. As the CEO of FedEx, you have been presented with the following proposals to deal with the situation:a. Reduce shipping rates to reflect the expense reduction.b. Increase the number of deliveries offered per day in some markets.c. Make long-term contracts to buy jet fuel and diesel at a fixed price for the nexttwo years and set shipping rates to a level that will cover these costs.Evaluate these alternatives in the context of the decision-making model presented inthe text.Isabel runs her family's small pineapple processing plant, which takes fresh pineapples and cuts them into pineapple rings, spears, and chunks. The capital stock of the firm consists of three machines of various vintages, each of which can process the pineapples into any of the three different forms. All of the machines are in excellent condition, and all machines can be running at the same time. Cost of processing per pineapple Maximum total capacity (pineapples) per day Machine 1 $ 0.10 250 Machine 2 0.25 400 Machine 3 0.50 500 (A) Assume that "cost of processing" includes all labor and materials, including the owner's wages. Assume further that Isabel's family signed a long-term contract (20 years) with a service company to keep the machines in good repair for a fixed fee of $1,825 per year, or $5 per day.1) Derive the firm's marginal cost curve.2) Derive the firm's total cost curve.(B) At a price of $0.40, how many pineapples would the company process?…