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 Italy in 2003. Suppose that prior to privatization, the price per kilowatt hour of electricity was €0.1 and that the inverse demand for electricity in each of these two regions of France is estimated as P=1.26 - 0.001Q (in euros). Furthermore, to supply electricity to its particular region of France, it costs each firm qQ) = 100 + 0.1Q (in euros). Once privatized, each firm will have incentive to maximize profits. Determine the number of kilowatt hours of electricity each firm will 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: 580 Instructions: Enter your response rounded to two decimal places. Per-kilowatt hour price: € 0.68 Compute the price elasticity of demand at the profit maximizing price-quantity combination. Instructions: Enter your response rounded to two decimal places. If you are entering a negative number, use a negative (-) sign. -0.59
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 Italy in 2003. Suppose that prior to privatization, the price per kilowatt hour of electricity was €0.1 and that the inverse demand for electricity in each of these two regions of France is estimated as P=1.26 - 0.001Q (in euros). Furthermore, to supply electricity to its particular region of France, it costs each firm qQ) = 100 + 0.1Q (in euros). Once privatized, each firm will have incentive to maximize profits. Determine the number of kilowatt hours of electricity each firm will 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: 580 Instructions: Enter your response rounded to two decimal places. Per-kilowatt hour price: € 0.68 Compute the price elasticity of demand at the profit maximizing price-quantity combination. Instructions: Enter your response rounded to two decimal places. If you are entering a negative number, use a negative (-) sign. -0.59
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
re-check all values please
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 Italy in 2003.
Suppose that prior to privatization, the price per kilowatt hour of electricity was €0.1 and that the inverse demand for electricity in each
of these two regions of France is estimated as P= 1.26 – 0.001Q (in euros). Furthermore, to supply electricity to its particular region of
France, it costs each firm CQ) = 100 + 0.1Q (in euros). Once privatized, each firm will have incentive to maximize profits.
Determine the number of kilowatt hours of electricity each firm will 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:
580
Instructions: Enter your response rounded to two decimal places.
Per-kilowatt hour price: €
0.68
Compute the price elasticity of demand at the profit maximizing price-quantity combination.
Instructions: Enter your response rounded to two decimal places. If you are entering a negative number, use a negative (-) sign.
-0.59
Does the price elasticity at the profit-maximizing price-quantity combination make sense?
Yes - with linear demand, a monopolist can maximize profits on any portion of the demand function.
O No - with linear demand, a monopolist always maximizes profits where elasticity is -1.
O No - with linear demand, a monopolist will never maximize profits on the elastic portion of the demand function.
O Yes - with linear demand, a monopolist will never maximize profit on the inelastic 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.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education