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February 12, 2018 ENERGY ECONOMICS – FOLDER 2 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 folders 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) (1a) List the names of the different forms of unbundling, with a very brief explanation of their meaning. (1b) Provide a motivation for (i) the weakest form of unbundling and (ii) for the strongest. 3 Question 2 (2 points) A monopolist has a Total Cost (TC) function given by TC = a + by2, where y is the quantity. Find the market equilibrium in the two following cases: (2a) A linear demand curve. Show all passages. Illustrate your answer also graphically. (2b) An exponential demand curve. Show all passages. Illustrate your answer also graphically. 4 Question 3 (2 points) (3a) Explain why being able to measure the Minimum Efficient Scale (MES) of a natural gas distribution company might be relevant for a regulator. (3b) Is the information about the MES enough to decide to regulate the natural gas distribution sector? Motivate your answer. 5 Question 4 (3 points) Consider a regulated firm who serves two types of…