QUESTION 4 ERCOT administers the electric grid in most of Texas. During the February 2021 winter freeze, the wholesale prioe of electricity was at the maximum allowed price of $9000/MWh for about 90 hours straight, while millions of customers did not have power. ERCOT was widely criticized for the high power prices during the winter storm, which contributed to some customers and utilities to facing very high bills in teh aftermath of the storm. One of the reforms enacted later in 2021 was to lower the maximum allowable wholesale price for power in ERCOT to $500O/MWh. The best explanation of these facts is: O Lowering the price ceiling will ensure that all consumers always receive adequate and affordable power. O Given that the price ceilling was binding for 90 hours in February 2021, lowering it may exacerbate shortages the next time similar conditions arise. O One reason that the price celling was binding for 90 hours in February 2021 is that the price elasticity of supply is negligible under the conditions that lead to widespread power outages. Lowering the price celing may lead to lower expenditure for the same amount of delivered power. O Texas has a free market for electric power, and the price is always determined by market forces. O None of the above.
QUESTION 4 ERCOT administers the electric grid in most of Texas. During the February 2021 winter freeze, the wholesale prioe of electricity was at the maximum allowed price of $9000/MWh for about 90 hours straight, while millions of customers did not have power. ERCOT was widely criticized for the high power prices during the winter storm, which contributed to some customers and utilities to facing very high bills in teh aftermath of the storm. One of the reforms enacted later in 2021 was to lower the maximum allowable wholesale price for power in ERCOT to $500O/MWh. The best explanation of these facts is: O Lowering the price ceiling will ensure that all consumers always receive adequate and affordable power. O Given that the price ceilling was binding for 90 hours in February 2021, lowering it may exacerbate shortages the next time similar conditions arise. O One reason that the price celling was binding for 90 hours in February 2021 is that the price elasticity of supply is negligible under the conditions that lead to widespread power outages. Lowering the price celing may lead to lower expenditure for the same amount of delivered power. O Texas has a free market for electric power, and the price is always determined by market forces. O None of the above.
Chapter1: Making Economics Decisions
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Transcribed Image Text:QUESTION 4
ERCOT administers the electric grid in most of Texas. During the February 2021 winter freeze, the wholesale price of electricity was at the maximum allowad price of
$9000/MWh for about 90 hours straight, while millions of customers did not have power. ERCOT was widely criticized for the high power prices during the winter storm,
which contributed to some customers and utilties to facing very high bills in teh aftermath of the storm. One of the reforms enacted later in 2021 was to lower the maximum
allowable wholesale price for power in ERCOT to S5000/MWh. The best explanation of these facts is:
O Lowering the price ceiling will ensure that all consumers always receive adequate and affordable power.
O Given that the price celling was binding for 90 hours in February 2021, lowering it may exacerbate shortages the next time similar conditions arise.
O One reason that the price celling wan binding for 90 hours in February 2021 is that the price elasticity of supply is negligible under the conditions that lead to
widespread power outages. Lowering the price celing may lead to lower expenditure for the same amount of delivered power.
O Texas has a free market for electric power, and the price is always determined by market forces.
None of the above.
QUESTION 5
You observe two different equilibria in the market for fresh-caught cod. Fresh-caught cod is supplied in a perfectly inelastic fashion, determined by the process of cod
fishing. The first equilibrium is one metric ton at a price of €8 per kilo, and the second equilibrium is two metric tons at a price of €4 per kilo. Based on this information, what
is your estimate of the price elasticity of demand for fresh-caught cod using the arc elasticity method?
O-2
O 2
O Not enough information is provided to determine the price elasticity of demand.
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