Generator 1 has 140 MW capacity and itsmarginal cost is $80/MWh. Generator 2has 220 MW capacity and its marginalcost is $130/MWh. The inverse demandcurve is: P = 465 – 0.7Q.a. Draw the supply curve and the inversedemand curve.b. At what price does supply = demand?c. Identify on the graph the ConsumerSurplus (CS), the Producer Surplus (PS),and the Scarcity Rent (SR). What is thetotal scarcity rent?d. Some people argue that we should notallow for scarcity rents (a market clearingprice that is higher than the largestsupplier bid), that instead the priceshould never exceed the largest supplierbid. What do you think, should we allowscarcity rents? Explain.

Generator 1 has 140 MW capacity and marginal cost is $80/MWh. Generator has 220 MW capacity and its marginal cost is $130/MWh. The inverse deman curve is: P = 465 – 0.7Q. Draw the supply curve and the inverse demand curve. At what price does supply = demand? Identify on the graph the Consumer

Generator 1 has 140 MW capacity and marginal cost is $80/MWh. Generator has 220 MW capacity and its marginal cost is $130/MWh. The inverse deman curve is: P = 465 – 0.7Q. Draw the supply curve and the inverse demand curve. At what price does supply = demand? Identify on the graph the Consumer

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

Generator 1 has 140 MW capacity and its
marginal cost is $80/MWh. Generator 2
has 220 MW capacity and its marginal
cost is $130/MWh. The inverse demand
curve is: P = 465 – 0.7Q.
a. Draw the supply curve and the inverse
demand curve.
b. At what price does supply = demand?
c. Identify on the graph the Consumer
Surplus (CS), the Producer Surplus (PS),
and the Scarcity Rent (SR). What is the
total scarcity rent?
d. Some people argue that we should not
allow for scarcity rents (a market clearing
price that is higher than the largest
supplier bid), that instead the price
should never exceed the largest supplier
bid. What do you think, should we allow
scarcity rents? Explain.

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