Figure 8.7 Marginal Cost Curve for an Electricity Firm (Firm 1)
A firm in the Texas electricity industry faces a stepwise marginal cost curve. When this firm supplies 200 MW or less, only its coal plant, Plant A, is on line, and its marginal cost is horizontal at $18 per MWh. At output quantities greater than 200 MW, the firm will also run its natural gas plants, Plants B and C, at marginal costs of $37 per MWh and $39 per MWh, respectively.