Answer to Question #67772 in Microeconomics for thuli

Question

If Eskom (assumed sole supplier of electricity) is earning economic profits in the short run. Explain using a well labelled diagram how much output Eskom will produce and at what price this output will be sold if Eskom maximises profits.

Answer 1

If Eskom (assumed sole supplier of electricity) is earning economic profits in the short run, then Eskom will produce such amount of output, for which MR = MC at the price from the demand curve for this amount of output.