NextEra Energy has been helped in its expansion by the fact that prices of renewable energy equipment,

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NextEra Energy has been helped in its expansion by the fact that prices of renewable energy equipment, such as wind turbines and silicon solar modules that are used in generating electricity from solar power, have been falling since 2010.

a. Draw a graph showing the market for coal used in generating electric power as it was in 2010, before the sharp declines in the prices of renewable energy equipment. Be sure to include on your graph the effects of the externality from burning coal, the economically efficient quantity of coal, and the market quantity of coal.

b. On your graph from part (a), show the effect on the market for coal of the falling prices of renewable energy equipment. Does the effect make the market quantity of coal closer to or further away from the economically efficient quantity of coal? Briefly explain.

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Macroeconomics

ISBN: 9780135801741

8th Edition

Authors: Glenn Hubbard, Anthony Patrick O Brien

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