The problem of the producer is to determine the quantity Q that maximizes its profit (the difference between its revenues and its cost of production). Profit ะป (Q) = PQ - TC is a function of the quantity produced. Its maximization leads to equal marginal revenue and marginal cost. The selected production is thus defined by this equality. The figure below shows this equilibrium.
The function Q (P) which combines the selling price the amount produced is called supply function of the company. She is represented by the portion of the marginal cost curve lying above the average cost curve (MC). Is an increasing function of price.
A monopoly operates so at a point where price is above marginal cost, whereas a competitive firm operates at a point where price is set at marginal cost. Monopoly, as is the case for AES-Sonel, the price will be higher and output lower (PM and QM), whereas in a competitive situation (P * and Q *) is the otherwise. The consequence is that electricity consumers will benefit from a lower level of satisfaction when the sector is organized as a monopoly rather than as competitive.
0 comments:
Post a Comment