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5. Deriving market supply for 9 points. The supply side of the market for electrical power is composed of two sellers, A and B. Let P be the price of one unit of electricity and Q be the quantity of electricity. Seller A owns a nuclear power plant with a constant marginal cost of 1 dollar and can produce a maximum of 7 units. Moreover, the nuclear power plant faces a minimum production of 4 units. Seller B owns a coal fired power plant with a constant marginal cost of 4 dollars and can produce a maximum of 8 units. a. Sketch the market supply by aggregating the two individual supplies. Clearly label your graph (i.e., indicate values for intercepts and kinks). (5 points) P Q b. Market demand for electricity is defined by Qd = 10 - 2P. i. Sketch the market demand. Clearly label your graph (i.e., indicate values for slope and choke price of demand). (1 point) ii. Suppose that the government implements a sales tax of 2 dollars, i.e., t = 2. 1. What is the market equilibrium WITH government intervention, {Q**, Po*, PS*}? (2 points) Hint: Use the graph to find the equilibrium. 2. On the graph drawn in part 5.a., sketch the market equilibrium WITH government intervention. Clearly label your graph (i.e., indicate values for equilibrium prices and quantity). (1 point) Nuclear power plants cannot shut down completely and, regardless of the price, always produce a minimum quantity of electricity, 7 5. Deriving market supply for 9 points. The supply side of the market for electrical power is composed of two sellers, A and B. Let P be the price of one unit of electricity and Q be the quantity of electricity. Seller A owns a nuclear power plant with a constant marginal cost of 1 dollar and can produce a maximum of 7 units. Moreover, the nuclear power plant faces a minimum production of 4 units. Seller B owns a coal fired power plant with a constant marginal cost of 4 dollars and can produce a maximum of 8 units. a. Sketch the market supply by aggregating the two individual supplies. Clearly label your graph (i.e., indicate values for intercepts and kinks). (5 points) P Q b. Market demand for electricity is defined by Qd = 10 - 2P. i. Sketch the market demand. Clearly label your graph (i.e., indicate values for slope and choke price of demand). (1 point) ii. Suppose that the government implements a sales tax of 2 dollars, i.e., t = 2. 1. What is the market equilibrium WITH government intervention, {Q**, Po*, PS*}? (2 points) Hint: Use the graph to find the equilibrium. 2. On the graph drawn in part 5.a., sketch the market equilibrium WITH government intervention. Clearly label your graph (i.e., indicate values for equilibrium prices and quantity). (1 point) Nuclear power plants cannot shut down completely and, regardless of the price, always produce a minimum quantity of electricity, 7