On Hot Summer Days, Electricity-Generating Capacity Is Sometimes Stretched to the Limit

question 130

Multiple Choice

On hot summer days, electricity-generating capacity is sometimes stretched to the limit. At these times, electric companies may ask people to voluntarily cut back on their use of electricity. An economist would suggest that

• A)every electric customer has an incentive to prevent the system from overloading, so this voluntary approach is the most efficient.
• B)it would be more efficient if the electric company raised its rates for electricity at peak times.
• C)it would be more efficient to have a lottery to decide who had to cut back their use of electricity at peak times.
• D)it would be more efficient to force everyone to cut their usage of electricity by the same amount.

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Definitions:

Overallocate Resources

The situation in which too many resources are dedicated to a specific task or sector, potentially leading to inefficiency and waste.

Price Discrimination

The practice of charging different prices to different consumers for the same product or service, based on willingness to pay.

Antitrust Regulations

Laws designed to prevent anti-competitive practices and promote fair competition among businesses.

Price Discrimination

A pricing strategy where a seller charges different prices for the same product or service to different customers, based on factors like location, age, or buying habits.