FIRST TWO PARTS OF THIS QUESTION HAS BEEN RESOLVED EARLIER. PLEASE HELP ME SOLVE THE 3RD PART ONLY.Consider the market for solar power. Assume the market is perfectly competitive and initially in long-run equilibrium; solar power sells for $.25 per kwh (kilowatt hour, a unit of power). (resolved) Draw 2graphs, one to represent the market (supply and demand), and one to represent a single firm (demand, marginal cost, and average cost curves). Assume a u-shaped average cost. Show the equilibrium price and the quantity produced by the market (Q) and by each individual firm (q).(resolved) Next, to encourage conservation, Congress taxes all forms of energy EXCEPT solar power, causing an increase in the demand for solar. Show what happens to the market and the firm in the short run; indicate clearly what happens to price, quantity, and profit.What happens to the market and the firm in the long run? Indicate clearly what happens to price, quantity, and profit, for each the market and the firm. Consider the market for solar power. Assume the market is perfectly competitive and initially inlong-run equilibrium; solar power sells for $.25 per kwh (kilowatt hour, a unit of power).RESOLVED 1. Draw 2graphs, one to represent the market (supply and demand), and one to represent asingle firm (demand, marginal cost, and average cost curves). Assume a u-shapedaverage cost. Show the equilibrium price and the quantity produced by the market (Q)and by each individual firm (q).RESOLVED2. Next, to encourage conservation, Congress taxes all forms of energy EXCEPTsolar power, causing an increase in the demand for solar. Show what happens to themarket and the firm in the short run; indicate clearly what happens to price, quantity, andprofit.3. What happens to the market and the firm in the long run? Indicate clearly what happensto price, quantity, and profit, for each the market and the firm.

In the long-run, the demand matches the supply.In short-run, if the demand increases, then the price will go up and the quantity demanded will also go up. As a result, more sellers will try to enter the market. And, because of that, the supply will go up. Thus, the price will start falling. The new sellers will enter the marketplace until the supply and demand match at the normal profit situation, where the long-run equilibrium initially was. Hence, in the long-run, firms will always earn a normal profit, where there is no loss-no gain.Therefore, each firm in the market will earn a normal profit in the long-run. The price will be the same as the initial long-run equilibrium price level, that is, $.25 per kWh. The equilibrium quantity will rise as there are more sellers in the market place now.

Answered: What happens to the market and the firm…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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FIRST TWO PARTS OF THIS QUESTION HAS BEEN RESOLVED EARLIER. PLEASE HELP ME SOLVE THE 3RD PART ONLY.

Consider the market for solar power. Assume the market is perfectly competitive and initially in long-run equilibrium; solar power sells for $.25 per kwh (kilowatt hour, a unit of power).

(resolved) Draw 2graphs, one to represent the market (supply and demand), and one to represent a single firm (demand, marginal cost, and average cost curves). Assume a u-shaped average cost. Show the equilibrium price and the quantity produced by the market (Q) and by each individual firm (q).
(resolved) Next, to encourage conservation, Congress taxes all forms of energy EXCEPT solar power, causing an increase in the demand for solar. Show what happens to the market and the firm in the short run; indicate clearly what happens to price, quantity, and profit.
What happens to the market and the firm in the long run? Indicate clearly what happens to price, quantity, and profit, for each the market and the firm.

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