Problem
Under a single-rate electricity tariff for households and small businesses in Australia, a flat usage rate is charged for "blocks" of electricity consumed. The rate for the first block is higher than that for the second, and the lowest rate applies to electricity usage in excess of the second block. Suppose the inverse demand curve for a typical consumer is p = 30 - Q/3, where p is cents per kilowatt hour (kWh) and Q is kWh per day, and the profit-maximizing monopoly has a constant marginal and average cost of 20 cents per kWh.
What would be the firm's profit, consumer surplus, and deadweight loss if the consumer uses 20 kWh of electricity per day when the monopoly charges 26.67 cents/kWh on the first block of 10 kWh/day, 23.33 cents/kWh on the second block of 10 kWh/day, and 20 cents/kWh on the remaining usage?