Question:
The manager of a public utility supplying electricity to a significant portion of a geographic region presides over an electrical generation facilities that can produce electricity using either natural gas or oil, or some combination of both. Facing skyrocketing natural gas prices, and similar increases in oil prices, how can production functions, isoquant and isocost analysis, and other tools of microeconomics help decide the best path for the company to pursue? What are the pros and cons of using these tools?