Microeconomics 19th Edition by Campbell McConnell,Stanley Brue,Sean Flynn

Exercise 2

A coal-fired power plant can produce electricity at a variable cost of 4 cents per kilowatt hour when running at its full capacity of 30 megawatts per hour, 16 cents per kilowatt hour when running at 20 megawatts per hour and 24 cents per kilowatt hour when running at 10 megawatts per hour. A gas- fired power plant can produce electricity at a variable cost of 12 cents per kilowatt-hour at any capacity from 1 megawatt per hour to its full capacity of 5 megawatts per hour. The cost of constructing a coal-fired plant is $50 million, but it costs only $10 million to build a gas-fired plant.