Competition and regulations unit

SECTION B [20| points] Show clearly all stages leading to the answer wherever necessaryr Question 1 [10 points] Assmning that, the market demand for electricity is a segmented market, composed by peak and off-peak periods, the demand function for peak-period is 40,, = 64 8P1, , and the inverse- demand curve for the off-periods is 2P0 = 4 0.5Q9 . The variable cost is $0.8 per unit of output per period, and the capital cost capacity are$ 1.2 per unit of capacity per day. It is noted that Capacity costs are sunk and cannot be adjusted between periods. Both periods take up half of each day. Find the optimal capacity, peak price and off-peak price