1 consider the competitive market for natural gas now, Ask an Expert

Economics

1. Consider the competitive market for natural gas. Now suppose that the price of renewable energy (a substitute for natural gas) decreases because of a technological advance. Answer the following questions about the natural gas market.

a. Draw two graphs, side by side, illustrating the short-run effects of the fall in renewable energy prices on the natural gas market and an individual natural gas firm’s output and profit. Use a graph with a ‘typical’ set of average total cost (ATC) and marginal cost (MC) curves.

b. Briefly explain the long-run effects of the fall in renewable energy prices on the natural gas market by using a graph (or graphs) to show the likely effects on the profits of natural gas firms, and the market price and market quantity of natural gas.

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91919198

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