The Average Cost for a Typical Electric-Power-Production Firm Is AC

question 102

Essay

The average cost for a typical electric-power-production firm is AC = 100 - 10Q + Q² where Q is measured in billion kilowatt hours per day.At the current regulated price,consumers demand 4 billion kilowatt hours per day.Is this market a natural monopoly? If demand increases to 10 billion kilowatt hours,is this market a natural monopoly? Explain.

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Definitions:

Price Discrimination

The strategy of selling the same product or service at different prices to different customers, based on their willingness to pay.

Natural Monopoly

A market condition where a single firm can supply a good or service to an entire market at a lower cost than could be achieved by multiple firms.

Profit-Maximizing

A strategy or process whereby a firm adjusts its production and pricing to achieve the highest possible profit.

Linear Demand Curve

A linear demand curve depicts a direct, inverse relationship between the price of a product and the quantity demanded, represented graphically as a straight line.