What is the utility company peak and off-peak profit levels

Reference no: EM132196707

Question: The marginal cost of General Electric(GE) generating electricity each hour is $5 million dollars and this utility company generates 5 Billion kilowatts per hour (KWh) regardless of consumer hourly demand. However, GE's generating capacity is also 5 Billion KWh.

A) Draw the figure that depicts the cost this utility company providing hourly electricity service.

Suppose the peak and off-peak consumer demand for this utility's electricity is as follows:

Pp = 12 - Q Peak demand

Pop = 9 - Q Off-peak demand

Where the intercepts for the respective demand curves are measured in millions of dollars, and output levels are measured in billions of KWhs.

Suppose the state regulatory commission requres General Electric to charge the same price to peak and off-peak customers and the price is set that peak demand equals this utility company's hourly capacity.

B.1 What is the utility company's peak and off-peak profit levels?

B.2 What is the off-peak surplus electricity generated? When using this pricing scheme?

C.1 What are the respective profit maximizition profit levels for peak and off-peak periods?

C.2 What is the total surplus electricity generated when using this pricing scheme?

D.1 What are the socially optimal peak and off-peak profit levels?

D.2 What is the total surplus electricity generated when using this pricing scheme?

Reference no: EM132196707

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