9. Refer to the graph below for answering the question that foll (10 poin Averag
ID: 1209308 • Letter: 9
Question
9. Refer to the graph below for answering the question that foll (10 poin Average Total Cost for Various Plant Sizes $10 ATC ATC ATC 6 0 1 2 3 4 5 6 7 8 per hour (millions) . In the wake of the energy crisis in California, many electricity generating facilities across the nation are reassessing their projections of future demand and capacity f electricity in their respective markets. As a manager at Florida Power & Light Company, you are in charge of determining the optimal size of two electricity generating facilities. The figure above illustrates the short-run average total cost curves associated with different facility sizes. Demand projections indicate that 6 million kilowatts must be produced at your South Florida facility, and 2 million kilowatts must be produced at your facility in the Panhandle.Explanation / Answer
A) The best one in south florida is medium size one L
The best one in other location is S size, As it can produce just little more than 2 million
B) Here you have to look at ATC structure,
Some smaller units have high ATC at full capacity, but at their optimal capacity their ATC is competitive
In the graph above you can see that behavior
So they both are actually optimal at their respective capacities. Here Medium plant is not feasible in south florida as it have higher ATC.
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