Briefly answer the following questions. Feel free to use a diagram or employ whatever calculations you feel are helpful.

(a) Increasingly stringent environmental regulations have made it more expensive for coal-fired power plants to operate. Meanwhile, recent technological advances in alternative energy science have reduced the demand for coal-fired power. How will these shocks affect the equilibrium price and quantity of coal-fired electricity? Can we say with certainty that the market price for coal-derived energy will fall? Why or why not?

(b) Two small airlines provide a seaplane shuttle service between East Hampton and Manhattan. The services are alike in every respect except that Sandpiper Air bought its seaplane outright for $1,750,000 in cash, whereas Aeromass takes advantage of a competitive market for aircraft leasing and rents its seaplane for $175,000 a year. If Sandpiper Air were to go out of business, it would be able to rent its seaplane to any of a large number of other carriers on the open market. Which airline has the lower (economic) breakeven price? Explain.