Question: explain the steps to answer these questions 2. (20 pts) Nexon Electric faces a Summer demand (High Season) given by: PH = 200 - QH

explain the steps to answer these questions

2. (20 pts) Nexon Electric faces a Summer demand (High Season) given by: PH = 200 - QH and a Spring demand (Low Season) of PL = 100 - QL- Nexon electric has to decide on the capacity of their generator (K), prices (PH, PL) and quantities (Q#, QI) Once they choose a capacity they cannot produce more than their capacity (Qr, Qu S K). Nexon electric uses wind energy, hence marginal cost of production is 0 once the tur- bines are built (K). However, those turbines are costly and the cost of capacity is r. Nexon can charge different prices in Summer and in Spring. (a) (4 pts) Write down Nexon's profit maximization problem. Do not forget about constraints and choice variables. (b) (10 pts) Solve the profit maximization problem and find {PH, PL, Qu, Qz, K} in terms of r

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