dentify whether the market supply curve will shift right or left or will stay the same for the following: a. Firms in an industry are required to pay a fine for their emissions of carbon dioxide. b. Companies are sued for polluting the water in a river. c. Power plants in a specific city are not required to address the impact of their emissions on the quality of air. d. Companies that use fracking to remove oil and gas from rock are required to clean up the damage. For each of your answers to the above questions, will equilibrium price rise or fall or stay the same?

dentify whether the market supply curve will shift right or left or will stay the same for the following:

a. Firms in an industry are required to pay a fine for their emissions of carbon dioxide.

b. Companies are sued for polluting the water in a river.

c. Power plants in a specific city are not required to address the impact of their emissions on the quality of air.

d. Companies that use fracking to remove oil and gas from rock are required to clean up the damage.

For each of your answers to the above questions, will equilibrium price rise or fall or stay the same?

 

 

Answer:

a. Firms in an industry are required to pay a fine for their emissions of carbon dioxide.

Answer:

Shift in Supply Curve: In this case, supply curve will shift towards the left. Supply curve shifts towards the left when supply moves downward because of factors other than change in price. In this case, because of the fine, the cost of production increases and suppliers would be willing to supply less at the given price. Therefore, supply curve will move towards left.

Effect on Equilibrium Price: Since demand will remain the same, because of shift in supply curve towards left, equilibrium price will go up.

b. Companies are sued for polluting the water in a river.

Answer:

Shift in Supply Curve: In this case, supply curve will shift towards the left. Supply curve shifts towards the left when supply moves downward because of factors other than change in price. In this case, companies are sued for polluting the water in river, the cost of production increases and suppliers would be willing to supply less at the given price. Therefore, supply curve will move towards left.

Effect on Equilibrium Price: Since demand will remain the same, because of shift in supply curve towards left, equilibrium price will go up.

c. Power plants in a specific city are not required to address the impact of their emissions on the quality of air.

Answer:

Shift in Supply Curve: In this case, supply curve will stay the same. This is because there will be no change in the quantity supplied.

Effect on Equilibrium Price: The equilibrium price will remain the same as there will be no shift in the demand or the supply curve.

d. Companies that use fracking to remove oil and gas from rock are required to clean up the damage.

Shift in Supply Curve: In this case, supply curve will shift towards the left. Supply curve shifts towards the left when supply moves downward because of factors other than change in price. In this case, companies are required to clean up the damage caused by fracking. Therefore, the cost of production increases and suppliers would be willing to supply less at the given price. Therefore, supply curve will move towards left.

Effect on Equilibrium Price: Since demand will remain the same, because of shift in supply curve towards left, equilibrium price will go up.

Asked on February 15, 2018 in economics.
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