A natural gas peaker plant sells electricity to a local utility at a price of $100...

 

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A natural gas peaker plant sells electricity to a local utility at a price of $100 per MWh, with a fixed cost of $100,000 and variable costs 50q+0.0005q². (g is measured in MWh). (a) What is the profit maximizing quantity of power to sell and how much profit will the generator make? (3pts) (b) Burning fossil fuel, the plant produces a lot of carbon dioxide. A new environmental regulation requires that for every Mef of natural gas burned, an emission permit for 0.5 tons of CO₂ must be purchased. It takes approximately 7.4 Mcf of natural gas to generate 1 MWh of electricity. and the cost of a 1ton CO₂ permit is $12. Rewrite the cost function from 5a to include the cost of the permit and solve for the profit maximizing quantity of power and profit. (3pts) A natural gas peaker plant sells electricity to a local utility at a price of $100 per MWh, with a fixed cost of $100,000 and variable costs 50q+0.0005q². (g is measured in MWh). (a) What is the profit maximizing quantity of power to sell and how much profit will the generator make? (3pts) (b) Burning fossil fuel, the plant produces a lot of carbon dioxide. A new environmental regulation requires that for every Mef of natural gas burned, an emission permit for 0.5 tons of CO₂ must be purchased. It takes approximately 7.4 Mcf of natural gas to generate 1 MWh of electricity. and the cost of a 1ton CO₂ permit is $12. Rewrite the cost function from 5a to include the cost of the permit and solve for the profit maximizing quantity of power and profit. (3pts)

Answer rating: 100% (QA)

a To determine the profitmaximizing quantity of power to sell we need to calculate the marginal cost MC and equate it to the price P Variable cost VC ... View the full answer