Question
Suppose that the production and sale of wind turbines in the Germany was a perfectly competitive market, with the usual downward sloping market demand curve
Suppose that the production and sale of wind turbines in the Germany was a perfectly competitive market, with the usual downward sloping market demand curve and upward sloping market supply curve. (That is, market supply and market demand are not perfectly elastic or perfectly inelastic. In addition, you can assume that the curves are straight lines.) Then, due to changes in the regulatory environment, the cost of production increases by N100 per turbine for all producers. In the new short-run equilibrium:
(a) The price buyers pay for turbines will go up by more than N100.
(b) The price buyers pay for turbines will go up by exactly N100.
(c) The price buyers pay for turbines will go up, but by less than N100.
(d) The price buyers pay for turbines will not go up.
(e) Cannot be determined whether the price will increase or decrease.
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