Suppose that solar energy were made available at a constant MC _social just below the preexisting market price in Figure 7.3. Draw a set of graphs similar to those in Figure 7.3 with the appropriate adjustments in the solar energy graph and the market MC _social curve. Indicate the appropriate level of energy production from each source. Repeat these steps under the new assumption that the constant MC _social for solar energy is almost zero, which is less than the MC social for the first unit of oil or coal.

Figure 7.3

Transcribed Image Text:

$ per Unit Efficient Market Price Solar solar MC social oll of MC social kWh Coal MC social coal Energy Market MC social all MBsocial Q"*