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July 11, 2017 ENERGY ECONOMICS – FOLDER 1 M.Sc. in Energy Engineering Duration: 2 hours and 30 minutes During the test students are not allowed to use class notes or textbooks or to leave the classroom Mark the exam folder with your Name, Last Name and Politecnico di Milano Id. Number At the end of the test hand over only the exam folder Name Last Name Id. Number Instructions and grading system Read the questions carefully and provide answers to all the points raised in each question. It is important to use a correct and appropriate terminology for all economic and technical terms. Remember to define all variables and parameters used in your answers. A full score will be awarded only if the answer is correct and complete. A partial score will be awarded only if the partial response, albeit incomplete, does not contain any errors. 2 Question 1 (2 points) Consider a perfectly competitive market. Determine the short-term supply curve of one firm operating in this market. Using the three graphs below, illustrate the firm’s profit (the area) in three different cases: (1b) The firm is making a negative profit. Motivate your answer. (1c) The firm is making a positive profit. Motivate your answer. (1d) The firm is making zero profit. Motivate your answer. Price OutputPrice Output 3 Question 2 (3 points) (2a) Indicate the fundamental motivation and requirement for imposing price and entry regulation in industries where suppliers have natural monopoly characteristics. (2b) Detail what you mean with the motivation using two examples (use graphs where necessary). Price Output 4 Question 3 (3 points) Consider a regulated firm who serves two types of consumers with demand curves: (1) p1 = 20 – 4 y1 (2) p2 = 15 – 4 y2 where p is the price and y is the quantity. Total costs (TC) for…