Take this hypothetical situation: Suppose that the supply side of the market for for electric energy is comprised of two sellers: Seller 1 and Seller 2. Let P be the price of one unit of electric energy, and Q be the quantity of electric energy.

• Seller 1 owns a hydropower factory with a constant marginal cost of $3 and can produce a maximum of 10 units of electric energy. In addition, the hydropower plant has a requirement of a minimum of 3 units of electric energy.
• Seller 2 owns a solar factory to produce electric energy. This factory has a constant marginal cost of $5 and can produce a maximum of 5 units of electric energy.

A) With this given information, please sketch the market supply by aggregating the two individual supplies. Please label the graph clearly for slopes, kinks, intercepts, etc.

B) Suppose that the price of geothermal increases. On the graph drawn in part A, show precisely how the supply curve changes.

C) Suppose that the price of geothermal increases. In a market equilibrium without government intervention, does the price of electric energy increase? Using the supply drawn in part A and a demand curve (that satisfies the law of demand), illustrate graphically in the space below 1) when the price of electric energy changes and 2) when the price of electricity does not change. Draw two separate graphs.