The French government announced plans to convert state-owned power firms EDF and GDF into separate limited companies that operate in geographically distinct markets. BBC News reported that France's CFT union responded by organizing a mass strike, which triggered power outages in some Paris suburbs. Union workers are concerned that privatizing power utilities would lead to large-scale job losses and power outages similar to those experienced in parts of the eastern coast of the United States and parts of taly in 2003. Suppose that prior to privatization, the price per kilowatt hour of electricity was Co.f and that the inverse demand for electricity in each of these two regions of France is estimated as P-1.4 -0.0010 in euros). Furthermore, to supply electricity to its particular region of France, it costs each firm ag - 110. 010 in euros). Once privatized, each firm will have incentive to maximize profits. Determine the number of kilowatt hours of electricity each firm wil produce and supply to the market, and the per-kilowatt hour price Instructions: Enter your response rounded to one decimal place. Quantity of kilowatt hours supplied: S Instructions: Enter your response rounded to two decimal places. Per-kilowatt hour price: € C Compute the price elasticity of demand at the profit maximizing price-quantity combination Instructions: Enter your response rounded to two decimal places. Ir you are entering a negative number, use a negative (- sign Does the price elasticity at the ft-maximizing price-quantity combination make sense? O Yes with linear demand, a monopolist will never maximize profit on the inelastic portion of the demand function, No - with linear demand, a monopolist always maximizes profits where elasticity is -1. No- with linear demand, a monopolist will never maximize profits on the elastic portion of the demand function Yes - with linear demand, a monopolist can maximize profits on any portion of the demand function. How much more profit will each fem earn as a result of privatization? Instructions: Enter your response rounded to two decimal places.
The French government announced plans to convert state-owned power firms EDF and GDF into separate limited companies that operate in geographically distinct markets. BBC News reported that France's CFT union responded by organizing a mass strike, which triggered power outages in some Paris suburbs. Union workers are concerned that privatizing power utilities would lead to large-scale job losses and power outages similar to those experienced in parts of the eastern coast of the United States and parts of taly in 2003. Suppose that prior to privatization, the price per kilowatt hour of electricity was Co.f and that the inverse demand for electricity in each of these two regions of France is estimated as P-1.4 -0.0010 in euros). Furthermore, to supply electricity to its particular region of France, it costs each firm ag - 110. 010 in euros). Once privatized, each firm will have incentive to maximize profits. Determine the number of kilowatt hours of electricity each firm wil produce and supply to the market, and the per-kilowatt hour price Instructions: Enter your response rounded to one decimal place. Quantity of kilowatt hours supplied: S Instructions: Enter your response rounded to two decimal places. Per-kilowatt hour price: € C Compute the price elasticity of demand at the profit maximizing price-quantity combination Instructions: Enter your response rounded to two decimal places. Ir you are entering a negative number, use a negative (- sign Does the price elasticity at the ft-maximizing price-quantity combination make sense? O Yes with linear demand, a monopolist will never maximize profit on the inelastic portion of the demand function, No - with linear demand, a monopolist always maximizes profits where elasticity is -1. No- with linear demand, a monopolist will never maximize profits on the elastic portion of the demand function Yes - with linear demand, a monopolist can maximize profits on any portion of the demand function. How much more profit will each fem earn as a result of privatization? Instructions: Enter your response rounded to two decimal places.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The French government announced plans to convert state-owned power firms EDF and GDF into separate limited companies that
operate in geographically distinct markets. BBC News reported that France's CFT union responded by organizing a mass strike, which
triggered power outages in some Paris suburbs. Union workers are concerned that privatizing power utilities would lead to large-scale
job losses and power outages similar to those experienced in parts of the eastern coast of the United States and parts of taly in 2003.
Suppose that prior to privatization, the price per kilowatt hour of electricity was Co.f and that the inverse demand for electricity in
each of these two regions of France is estimated as P-1.4 -0.0010 in euros). Furthermore, to supply electricity to its particular region
of France, it costs each firm ag - 110 + 010 in euros). Once privatized, each firm will have incentive to maximize profits.
Determine the number of kilowatt hours of electricity each firm wil produce and supply to the market, and the per-kilowatt hour price
Instructions: Enter your response rounded to one decimal place.
Quantity of kilowatt hours supplied: S
Instructions: Enter your response rounded to two decimal places.
Per-kilowatt hour price: € C
Compute the price elasticity of demand at the profit maximizing price-quantity combination
Instructions: Enter your response rounded to two decimal places. Ir you are entering a negative number, use a negative (-) sign
Does the price elasticity at the
-maximizing price-quantity combination make sense?
O Yes with linear demand, a monopolist will never maximize profit on the inelastic portion of the demand function,
No - with linear demand, a monopolist always maximizes profits where elasticity is -1.
No- with linear demand, a monopolist will never maximize profits on the elastic portion of the demand function
Yes - with linear demand, a monopolist can maximize profits on any portion of the demand function.
How much more profit will each firm earn as a result of privatization?
Instructions: Enter your response rounded to two decimal places.
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