316632633.pdf - Business Economics CaseAnalysis: Note Read the case study The Early Bird Electric Power Despatching to answer the following questions

316632633.pdf - Business Economics CaseAnalysis: Note Read...

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Business Economics Note: Read the case study “The Early Bird – Electric Power Despatching” to answer the following questions. Questions (i)How is operating efficiency of the generating unit defined? Why does it vary between units? (ii)How do shifts in production function affect the operating efficiency of the generating unit? (iii)Why do input costs vary between units? How do they affect the production efficiency? Case Analysis: The Early Bird – Electric Power Load Despatching
The Early Bird – Electric Power Load DispatchingElectric utility firms have, for more than two decades, used marginal product-marginal cost concepts to generate and dispatch electric power in a more efficient, lower-cost manner. Southern Company, the nation’s third largest utility, refers to its load dispatching method as the “Early Bird” system. Southern’s Early Bird is designed to provide automatic, computerized control of all the company’s power production and transmission facilities. The Early Bird continuously calculates the marginal cost of delivering additional kilowatts of electricity to Southern Company customers anywhere in the company’s service area; then, as electricity demand rises or falls at points throughout the system, Early Bird transmits “raise” or “lower” impulses to the company’s generating units and routes the correct amount of electricity along the most economical transmission path to the end user. Periodically, Southern Company engineers test the operating efficiency of every piece of power-generating equipment the company has in service. The purpose of the test is to determine how much fuel, labor, and other variable inputs are required to produce electricity with that unit and, subsequently, to calculate a production function for that generating unit. Experience has shown that revised production function equations must be calculated from time to time because normal wear and tear, maintenance problems, and mechanical efficiency vary over time and from generator to generator, depending on who manufactured it, when it was purchased, how long it has been in service, and the reliability with which it has performed. In other words, the

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