This topic contains a solution. Click here to go to the answer

Author Question: Assume an electric company has spent 3 billion on a nuclear power plant. It's producing at a price ... (Read 64 times)

Haya94

  • Hero Member
  • *****
  • Posts: 558
Assume an electric company has spent 3 billion on a nuclear power plant. It's producing at a price per kilowatt hour that is above its average variable cost. However, after 10 years the price remains below average total cost.
 
  If there is no expectation that price will equal or rise above the average total cost what would you expect this company to do with its nuclear power plant? Why is the 3 billion not part of the decision? Explain.

Question 2

Explain how price adjusts to eliminate excess demand.
 
  What will be an ideal response?



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

coyin

  • Sr. Member
  • ****
  • Posts: 334
Answer to Question 1

In the short run it is acceptable to make an operating profit in order to minimize economic losses. However, in the long run the expectation is that the firm should be able to enjoy at least a normal profit. Since this firm has no hope of earning a normal profit the best thing to do in the long run is to shut down the nuclear power plant.

Answer to Question 2

When there is excess demand, quantity demanded is greater than quantity supplied. Therefore, the price will rise. As the price rises, quantity demanded falls and quantity supplied rises. Price will continue to rise until quantity demanded and quantity supplied are equal (at the market equilibrium).




Haya94

  • Member
  • Posts: 558
Reply 2 on: Jun 29, 2018
:D TYSM


Alyson.hiatt@yahoo.com

  • Member
  • Posts: 354
Reply 3 on: Yesterday
Gracias!

 

Did you know?

Approximately one in four people diagnosed with diabetes will develop foot problems. Of these, about one-third will require lower extremity amputation.

Did you know?

As many as 20% of Americans have been infected by the fungus known as Histoplasmosis. While most people are asymptomatic or only have slight symptoms, infection can progress to a rapid and potentially fatal superinfection.

Did you know?

According to research, pregnant women tend to eat more if carrying a baby boy. Male fetuses may secrete a chemical that stimulates their mothers to step up her energy intake.

Did you know?

Adults are resistant to the bacterium that causes Botulism. These bacteria thrive in honey – therefore, honey should never be given to infants since their immune systems are not yet resistant.

Did you know?

The most destructive flu epidemic of all times in recorded history occurred in 1918, with approximately 20 million deaths worldwide.

For a complete list of videos, visit our video library