A major South African city generates electricity and sells it to its consumers. The city faces competition from independent renewable power producers who also have licences to sell electricity to the public. The city however has cost advantages due to its size, but it is concerned of the political and economic ramifications of raising its tariffs, in these uncertain economic times. As a result, it is highly likely that tariffs will remain unchanged over the next financial year. The city’s marginal revenue is given as R3 000, and its costs are given as follows: TC = R82 000 + R1 000 + 0.01q2 MCMC= R1 000 + R0.02q Calculate the number of units that would maximise profits for the city?
A major South African city generates electricity and sells it to its consumers. The city faces competition from independent renewable power producers who also have licences to sell electricity to the public. The city however has cost advantages due to its size, but it is concerned of the political and economic ramifications of raising its tariffs, in these uncertain economic times. As a result, it is highly likely that tariffs will remain unchanged over the next financial year. The city’s marginal revenue is given as R3 000, and its costs are given as follows: TC = R82 000 + R1 000 + 0.01q2 MCMC= R1 000 + R0.02q Calculate the number of units that would maximise profits for the city?
Chapter28: Antitrust And Regulation
Section: Chapter Questions
Problem 7E
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A major South African city generates electricity and sells it to its consumers. The city faces competition from independent renewable power producers who also have licences to sell electricity to the public. The city however has cost advantages due to its size, but it is concerned of the political and economic ramifications of raising its tariffs, in these uncertain economic times. As a result, it is highly likely that tariffs will remain unchanged over the next financial year. The city’s marginal revenue is given as R3 000, and its costs are given as follows:
TC = R82 000 + R1 000 + 0.01q2 MC
MC= R1 000 + R0.02q
Calculate the number of units that would maximise profits for the city?
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