1. Natural MonopolyGiven the inverse supply and inverse demand equation below,1PD3D + 40Ps= -5QD + 30a. Find the equilibrium without any government intervention(Q* = 21.4, P* = 32.9)b. If the market is to be regulated, find the minimum subsidy toget an optimal equilibrium (562.5)2. Two sided biddingThese are the list of bids from electricity producers as wellelectricity distribution firms.Electricity producersElectricity distributionAsking price/KWh quantity/KWh Asking price/KWh quantity/KWh25$35$$$$$0.770.360.480.550.6835353040SSSS0.500.380.570.680.4460201540a. Find the optimal market price and quantity (P* = 48 to 50, Q*= 70)b. Find the total welfare3. Peak-load pricingGiven the following peak demand and off peak demand,Qpeak = -Pp + 120Qoffpeak = -2PD + 60a. If the operational cost for off peak and peak period is $5 andthe capital cost is $50, find the optimal pricing mechanism!(PPeak = $55, Poffpeak = $5)b. If the capital cost is $70 instead of $50, find the optimalpricing mechanism! (PPeak = $73.3, Poffpak = $6.66)

“Since you have posted multiple questions, we will provide the solution only to the first question…

1. Natural Monopoly Given the inverse supply and inverse demand equation below, PD=-=- 3D QD + 40 Ps= -5QD+30 a. Find the equilibrium without any government intervention (Q* = 21.4, P* = 32.9) b. If the market is to be regulated, find the minimum subsidy to get an optimal equilibrium (562.5)

1. Natural Monopoly Given the inverse supply and inverse demand equation below, PD=-=- 3D QD + 40 Ps= -5QD+30 a. Find the equilibrium without any government intervention (Q* = 21.4, P* = 32.9) b. If the market is to be regulated, find the minimum subsidy to get an optimal equilibrium (562.5)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

1. Natural Monopoly
Given the inverse supply and inverse demand equation below,
1
PD
3D + 40
Ps= -5QD + 30
a. Find the equilibrium without any government intervention
(Q* = 21.4, P* = 32.9)
b. If the market is to be regulated, find the minimum subsidy to
get an optimal equilibrium (562.5)
2. Two sided bidding
These are the list of bids from electricity producers as well
electricity distribution firms.
Electricity producers
Electricity distribution
Asking price/KWh quantity/KWh Asking price/KWh quantity/KWh
25
$
35
$
$
$
$
$
0.77
0.36
0.48
0.55
0.68
35
35
30
40
SSSS
0.50
0.38
0.57
0.68
0.44
60
20
15
40
a. Find the optimal market price and quantity (P* = 48 to 50, Q*
= 70)
b. Find the total welfare
3. Peak-load pricing
Given the following peak demand and off peak demand,
Qpeak = -Pp + 120
Qoffpeak = -2PD + 60
a. If the operational cost for off peak and peak period is $5 and
the capital cost is $50, find the optimal pricing mechanism!
(PPeak = $55, Poffpeak = $5)
b. If the capital cost is $70 instead of $50, find the optimal
pricing mechanism! (PPeak = $73.3, Poffpak = $6.66)

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