How much more profit will each firm earn as privatization

Reference no: EM13222875

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 0.105Q and that the inverse demand for electricity in each of these two regions of France is P = 1.255 - 0.001Q (in euros). Furthermore, to supply electricity to its particular region of France, it costs each firm C(Q) = 100.625 + 0.105Q (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. Compute the price elasticity of demand at the profit maximizing price-quantity combination. Explain why the price elasticity makes sense at the profit-maximizing price-quantity combination. Compare the price-quantity combination before and after privatization. How much more profit will each firm earn as a result of privatization?

Reference no: EM13222875

Questions Cloud

What generation are you a member of : What generation are you a member of and what motivates you to work? What characteristics about your co-workers "get under your skin", figuratively speaking?

Determine profit-maximizing amount of electricity to produce : The second largest public utility in the nation is the sole provider of electricity in 32 counties of southern Florida. To meet the monthly demand for electricity in these counties, which is given by the inverse demand function P = 1000 - 5Q.

Explain what are the number average molecular weight : What are the number average molecular weight and weight average molecular weight of the blend?

Decide how to identify the problems that need fixing : Figure out whether to arrive at decisions quickly or slowly in choosing among the various alternative adjustments.

How much more profit will each firm earn as privatization : 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

Explain heat of vaporization and normal boiling point : Chloroform, CHCl3, was once used as an anesthetic. Its vapor pressure is 197 mm Hg at 23 degrees Celsius, and 448 mm Hg at 45 degrees Celsius. Estimate its heat of vaporization and normal boiling point.

What is the overall profitability : Using the traditional method, which bases decisions solely on a product's contribution to profits and over-head, what is the optimal product mix and what is the overall profitability?

Major models of staffing found in the readings : Compare the three major models of staffing found in the readings and select the implications that recruiters face in successfully obtaining the desired talent for the organization.

Explain the residual gas in the system : how many atoms of oxygen per second are colliding with each square centimeter of the surface? The residual gas in the system has the same composition as air, and the temperature is 295K

User Account

All Pages