Managerial Economics & Business Strategy 8th Edition by Michael Baye,Jeff Prince

Exercise 23

Enrodes is a monopoly provider of residential electricity in a region of northern Michigan. Total demand by its 3 million households is Q d = 1,500 - 2 P , and Enrodes can produce electricity at a constant marginal cost of $4 per megawatt-hour. Consumers in this region of Michigan have recently complained that Enrodes is charging too much for its services. In fact, a few consumers are so upset that they are trying to form a coalition to lobby the local government to regulate the price Enrodes charges. If all the consumers of this region joined the coalition against Enrodes, how much would each consumer be willing to spend to lobby the local government to regulate Enrodes's price? Do you think the consumers will be successful in their efforts? Explain.