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Consider the market for electricity. Suppose demand (In megawatt hours) is given by Q=50-P and that the marginal cost of generating electricity is $10 per megawatt hour (P is in the same units). Suppose further that smoke is generated in the production of electricity in direct proportion to the amount of electricity generated. The health damage from the smoke is $15 per megawatt hour generated.Suppose the electricity is produced by competitive producers. What price will be charged and how much electricity will be produced?
1. The price charged by the producers will be such that MR=MC. Here, MC=10 MR=? TR= pq= (50-q)q = 50q- q^2 Thus, MR= 50-2q…

Thus, MR=MC=> 50-2q= 10 => 40= 2q => q=20 Thus, P=50-q = 50-20= 30(ans)



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