Calculate output, consumer surplus, and profit

Reference no: EM13902613

There are 10 households in Lake Wobegon, Minnesota, each with a demand for electricity of Q = 50 - P. Lake Wobegon Electric's (LWE) cost of producing electricity is TC = 500 + Q.

a. If the regulators of LWE want to make sure that there is no deadweight loss in this market, what price will they force LWE to charge? What will output be in that case? Calculate consumer surplus and LWE's profit with that price.

b. If regulators want to ensure that LWE doesn't lose money, what is the lowest price they can impose? Calculate output, consumer surplus, and profit. Is there any deadweight loss?

c. Kristina knows that deadweight loss is something that this small town can do without. She suggests that each household be required to pay a fixed amount just to receive any electricity at all, and then a per-unit charge for electricity. Then LWE can break even while charging the price calculated in part (a). What fixed amount would each house- hold have to pay for Kristina's plan to work? Why can you be sure that no household will choose instead to refuse the payment and go without electricity?

Reference no: EM13902613

Questions Cloud

What can i say to illustrate the intrinsic value of human : What can I say to illustrate the intrinsic value of human capital

Environment and environmental health : Over the past fifty years the city of Corpus Christi, TX has increased in population from 50,000 to 350,000. Do you think this increase in population has affected the 'environment' and 'environmental health' in the city? Specifically explain

Prepare a table showing income before depreciation : Tory Enterprises pays $238,400 for equipment that will last five years and have a $43,600 salvage value.

Population clusters and transportation flows : 1. Population clusters and transportation flows critical to the major industries on the continent. Indicate relative size and importance to South America such as the importance of the Interstate Highway System to the trucking industry in the Unite..

Calculate output, consumer surplus, and profit : If regulators want to ensure that LWE doesn't lose money, what is the lowest price they can impose? Calculate output, consumer surplus, and profit. Is there any deadweight loss?

Define validity - predictive and concurrent validity : Define validity - Briefly describe and discuss (a) predictive validity, (b) concurrent validity, and (c) content validity - Discuss three (3) selection devices including an analysis of their validity and reliability

How many tas will it hire : The employment of teaching assistants (TAs) by major universities can be characterized as a monopsony. Suppose the demand for TAs is W = 30,000 - 125n, where W is the wage (as an annual salary) and n is the number of TAs hired. The supply of..

Calculate cash flow from operating activities : Calculate Cash Flow from operating activities. Calculate Cash Flow from Investing activities. Calculate Cash Flow from financing activities.

Discuss the history of the discipline : Discuss the history of the discipline.

User Account

All Pages