Review question 1
A firm uses a single input, labor, to produce output q according to the production function
q 8 L . The commodity sells for $150 per unit and the wage rate is $75 per hour.
(i)
(ii)
(iii)
Find the profit-maximizing quantity of L.
Find th

Solutions to Midterm Review Questions
Question 1
(i)
max = P q(L) wL
L
max = (150)8 L 75L
L
= 600L1/2 75 = 0
L
L = 64
(ii)
q = q(L ) = 8 64 = 64
(iii)
= (150)8 64 75(64) = 4800.
Question 2
(a) Both factor prices decrease, but the change in the ratio of

Study Guide for Midterm
Spring 2016
Exam format
Exam format will be similar to the mid-term posted on bCourses. There will be some short answer
conceptual questions, some more quantitative problems, and a longer question to test your intuitive
understandi

Study Guide for final exam Spring 2016
What will be covered on the final exam?
The final exam will be cumulative. Many of the topics we covered in the first half of the semester (the
theory of the firm, economic models of production, derived demand for fa

Final Exam
EEP 147
Spring 2015
M. Fowlie
NAME_(1 point)
Instructions: You have 3 hours to complete this exam. I expect that most students will complete the
exam in less time, but you can take as long as 3 hours to finish.
This exam is closed-book: no book

Study Guide for final exam Spring 2016
What will be covered on the final exam?
The final exam will be cumulative. Many of the topics we covered in the first half of the semester (the
theory of the firm, economic models of production, derived demand for fa

Midterm Exam
E EP 147
Spring 2015
NAME § ‘33 “WW ’5’ Ms} (1 point!)
W. . ———
instructions: You have 1 hour and 20 minutes to complete this exam. This exam is closed~book2 no
books or notes are allowed. if you are using a pro
before the exam begins. You

EEP 147: Lecture #20 Outline
GSI: Louis Preonas
April 12, 2016
Please refer to Merediths slides to supplement this lecture outline!
1
Renewable Energy
There are three basic ways to reduce CO2 emissions from the electricity sector:
Scale: reducing the to

EEP 147: Lecture #23 Outline
GSI: Louis Preonas
April 21, 2016
Please refer to Merediths slides to supplement this lecture outline!
1
Renewable Energy (Part 4)
Estimated cost of CO2 abatement: If we want to calculate the cost of CO2 abatement
that result

EEP 147: Lecture #2 Outline
GSI: Louis Preonas
Januray 21, 2016
1
Whats an economic model?
Models of atoms with brains
What makes it a model is the simplicity. Models strip out unnecessary details, in order to
help us understand basic economic relations

EEP 147: Lecture #24 Outline
GSI: Louis Preonas
April 26, 2016
Please refer to Merediths slides to supplement this lecture outline!
1
Energy Efficiency Basics
Energy Services: Rarely (if ever) does energy enter directly into an individuals utility
functi

EEP 147: Lecture #16 Outline
GSI: Louis Preonas
March 17, 2016
Please refer to Merediths slides to supplement this lecture outline!
1
Emissions Trading
Power plants emit harmful pollutants from the combustion of fossil fuels, include sulfur dioxide
(SO2

Q1
(i)
Set up profit maximization problem:
150 8
First order conditions for a maximum:
0
600
75
75
Profit maximizing choice of L=75.
(ii)
(iii)
Substitute 75 into the production function: q=64
Substitute L and q into profit function: 150*(64)- (75*64)=480

EEP 147: Lecture #8 Outline
GSI: Louis Preonas
February 11, 2016
1
Cournot Oligopoly: Wolfram (1999)
1.1
Context: Privatization of the British Electricity Sector
Wolfram (1999) focuses on the British electricity sector, after it was privatized in the
199

EEP 147: Lecture #3 Outline
GSI: Louis Preonas
Januray 26, 2016
1
Review of cost curves
In perfect competition, where all firms are identical, the short-run aggregate supply curve will
intersect the vertical axis where M C intersects AV C. This makes sen

EEP 147: Lecture #11 Outline
GSI: Louis Preonas
February 25, 2016
Please refer to Merdiths slides to supplement this lecture outline!
1
Intertemporal Decisionmaking
1.1
Discounting
Why do we discount? Money today is worth more than money tomorrow!
A dis

EEP 147: Lecture #6 Outline
GSI: Louis Preonas
February 4, 2016
1
Releasing the Assumption of Price-Taking Firms
So far, weve assumed that firms are behaving as price-takers, meaning that they behave under the
the assumption that their production decision

EEP 147: Lecture #13 Outline
GSI: Louis Preonas
March 8, 2016
Please refer to Merdiths slides to supplement this lecture outline!
1
Electricity Industry Regulation and Restructuring
1.1
Regulation of a Natural Monopoly
Regulators want to promote economic

EEP 147: Lecture #9 Outline
GSI: Louis Preonas
February 16, 2016
1
Bertrand Oligopoly Model (continued)
The standard Bertrand model will satisfy the following assumptions
Setup: a strategic, simultaneous, non-cooperative, full-information game
Players:

Announcements
Problem set 2 due Friday 3 pm.
PS 1 & 2 solutions posted Friday 3:30.
Mid-term prep:
Meredith will hold extra office hours Monday 4-5.
Louis will have a midterm review session
on Tuesday March 1, 5:00-6:30pm in Moffitt 106
Louis will h

EEP 147: Lecture #7 Outline
GSI: Louis Preonas
February 9, 2016
1
Dominant Firm and Competitive Fringe Model
Set up of the model
One dominant firm it is large
A competitive fringe of suppliers
Assume that the number of firms is fixed
All firms (domin

Dominant Firm and a Competitive Fringe - No Entry Model
Although the pure monopoly model gets top billing in every economics text book, real life examples are not that
common. A slight modification makes this model somewhat more realistic. In the dominant

EEP 147: Lecture #10 Outline
GSI: Louis Preonas
February 23, 2016
1
Externalities (continued)
1.1
Pollution Externalities from Production
Recall the two firm model from last class. Firm A (ACME Chemical) has the profit function
A = PA qA CA (qA ) F CA
F

EEP 147: Lecture #4 Outline
GSI: Louis Preonas
Januray 28, 2016
1
Inputs to Production
1.1
Example (continued from last lecture)
Consider a fertilizer producer with a single variable input (natural gas E), and the production
function
q(E | x1 , . . . , xJ

EEP 147: Lecture #5 Outline
GSI: Louis Preonas
February 2, 2016
1
1.1
Perfect Competition
Single Product, Two Factor Inputs
Consider a firm in a competitive industry that produces a single homogeneous product (fertilizer
q), with two factor inputs: energy

EEP 147: Lecture #12 Outline
GSI: Louis Preonas
March 1, 2016
1
Economic Regulation
1.1
The Basics
Economic regulation uses the governments ability to coerce for the purpose of restricting
decisions of economic agents.
These agents can be individuals (e

EEP 147: Lecture #14 Outline
GSI: Louis Preonas
March 10, 2016
Please refer to Merdiths slides to supplement this lecture outline!
1
Nuts and Bolts of Electricity Restructuring
Electricity industry restructuring transformed much of the U.S. electricity i

A short note on the pro-competitive effects of forward contracts in electricity spot markets
A forward contract is a contract to deliver a specified quantity qf at a future date (exercise date or maturity date).
The forward price Pf is the agreed-upon pri