PS5.4.3 - based on the attached problem screenshotIn the long run, assuming that firms can choose their technology, what will happen? 1. The answer depends on firms desired level of output 2. Some firms will choose the solar technology (tech. 1)3. No firms will choose the solar technology (tech .1)4. All firms will choose the solar technology (tech. 1)5. The answer is ambiguous

Despondent over the Red Sox's terrible season, Prof. Gruber decides to quit his day job and start a bicycle manufacturing firm in Kendall Square. As he starts looking into the bicycle manufacturing industry, he realizes it has some interesting features. First, he realizes that it operates as a competitive industry. Second, he finds that there are two technologies used by firms in the industry. Technology 1 uses solar power, and has a cost function C' (q) = q + 4q' + 32 for q > 0. Technology 2 uses electricity from the grid and is more efficient, with a cost function C (q) = q + 2q2 + 32 for q > 0. Assume that we are in the long run, so firms using both technologies can shut and leave the market at 0 cost, so that C (0) = 0 for both technologies