1. You are given the following demand and total cost equations:
Q = 20 – 0.25P
TC = 12Q – 0.125Q2
a. explain how you can tell whether or not this situation represents a natural monopoly.
b. solve for the profit maximizing price and quantity for a monopolist.
c. solve for the price and quantity that would hold in perfect competition.
d. then explain why the perfect competition outcome cannot hold in the long run.

2. According to Tietenberg and Lewis (2011), what are the four government policies relating to pollution? Which one(s) fall(s) under the Command and Control or the Incentive-based policies?

3. You are an electricity power generator, and you want to examine the economics of substituting natural gas for coal, and each would be used to run a 500MW power plant for one year. However, assume that each plant will only operate for 90% of the time. Determine how many MWh of electricity will be produced. Assume thermal efficiencies of 45% and 58% for coal and gas, respectively. Assume 20 MMBtu/ton for coal and 1.05 MMBtu/mcf for gas. Determine how much coal (in tons) and how much natural gas (in mcf) will be required. If natural gas is priced at $2.50/MMBtu, what will be the breakeven price for coal in terms of dollars per ton? Explain the basis for a decision to substitute natural gas for coal.

4. If one kilowatt hour equals 3412 BTU or 860 kilocalorie, then 920 kilowatt hours equals:
a. 0.000293 BTU and 0.00116 kilocalories.
b. 3,139,040 BTUs and 791,200 kilocalories.
c. 3412 BTU or 860 kilocalorie

5. What are externalities?
a. An external cost exists when…an activity by one agent causes a loss of welfare to another agent…and…the loss of welfare is uncompensated (David W. Pearce and R. Kerry Turner, Economics of natural Resources and the Environment, 1990, p. 61.). In short: anytime my actions affect someone else.
b. The pollution generated by energy production is called an externality because it is released to the external environment.
c. When my actions do not affect someone else: it is external to me!

6. Short-run elasticities are linked to:
a. Volatility
b. Forward curve volatility differentials
c. the weather
d. All of the above

1. You are given the following demand and total cost equations: Q...