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Unformatted text preview: Answers to the Problems Labor
rd) ÷ ÷
÷ c. We use more than one type of plant for at least three reasons. First, hydroelectric plants might be the
least expensive to operate, but they must be near rapidly flowing rivers. Second, the scale of the
electricity that is demanded needs to be examined. For instance, at some locations so much electricity
is demanded that hydroelectric plants (or other type of plants) are operating where there are
diseconomies of scale that raise their long-run average cost. In these locations, some other plant,
perhaps gas or nuclear, might have lower average costs for the quantity of electricity demanded. Third,
the price of natural gas, coal, oil, and nuclear fuel can vary tremendously. By having different types of
plants some protection is gained against having a concentration in a type of plant whose costs
happened to soar. ...
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This note was uploaded on 11/23/2011 for the course ECON 202 taught by Professor Brightwell during the Fall '08 term at Texas A&M.
- Fall '08