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June 29, 2016 ENERGY ECONOMICS 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 1) A monopolist has a cost function given by TC = 100 + 4y. What is the optimal level of output and price in the following cases? a) Demand curve given by D(p) = 100 – 2p (1 point) b) Demand curve given by D(p) = 10p-3 (1 point) c) Demand curve given by D(p) = 100/p (2 points) 3 2) Consider the case of a single homogeneous product. List the motivations for the introduction of price regulation in an industry. (1 point). Provide their definitions. (2 points). Discuss the issue of ‘economic performance’ in some details. (3 points) 4 3) For the current regulatory period the Italian regulator has made the following choices regarding the electricity distribution sector: a) X factor equal to 2.8%, to be applied only to Operating Costs; b) Allowed Rate of Return on investments equal to 7.6%; c) Distribution tariff for residential consumers includes two components: • A equal to 708 c€ per point of delivery per year; • b equal 0.539 c€/kWh for consumption levels…