Question
The May 4, 2021 print edition of The Wall Street Journal had a story titled EPA Eyes Emissions of Cooling Appliances.The article reports the EPA
The May 4, 2021 print edition ofThe Wall Street Journalhad a story titled "EPA Eyes Emissions of Cooling Appliances."The article reports the EPA is going to ban the use of hydrofluorocarbons in cooling devices such as air conditioners and refrigerators.
Assume, for purposes that the refrigerator market is currently a perfectly competitive market with the following conditions:
Now consider the impact of the ban of hydrofluorocarbons. The ban will force refrigerator manufacturers to retool their factories to use different coolant materials as well as use more expensive equipment from now on. Assume this will represent a permanent increase in Fixed Cost for each refrigerator manufacturer.
- On the same (side-by-side) graph you produced in Question 2, graphically depict any changes in the marketplace and any changes that impact the individual firm.
- Show the movements of the appropriate curve or curves at this new Short Run Equilibrium (SRE).
- Indicate the new market equilibriumP1andQ1, the optimal output of an individual firm representative of the other firms in the industry at this SRE (labeled asq1), and the individual firm's profit, if any (shaded and clearly labeled as1).
- Provide a brief narrative explaining the movements and the resulting change in an individual firm's profit, if any. Please make sure you address the changes in the market equilibrium quantityQ, market priceP, and the individual firm's profit maximizing quantityq, if any.
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