Avenue functions

Question

The energy company New York State Electric and Gas charges each residential customer a basic fee for electricity of $16.23, plus 0.0222 per kilowatt hour. Assuming there are 500,000 residential customers, what is the monthly revenue from the basic fee? What is the company’s revenue function for each month? What is the marginal revenue?

Answer 1

Hello, Tom,

Information about the actual monthly useage (kw*hr) of electricity is not included. Let's assign the letter P for the average monthly kw*hr useage by the customers.

The basic fee ($16.23/month) is multiplied by the number of customers (500,000) to obtain the monthly revenue from the basic fee of $8,115,000/month.

The revenue, R, for each month would be

R = $8,115,000 + ($0.023)*P

I'm not sure how the "marginal revenue" is defined here. Perhaps the amount above the guaranteed monthly fee? That would be ($0.023)*P

Bob