Final answer:
Total revenue will likely increase due to technological improvements that reduce production costs, leading to increased supply and potentially higher total revenue. The market supply curve will shift left for fines and clean-up requirements, and equilibrium prices will rise as a result.
Step-by-step explanation:
Because total revenue will increase due to the technological improvement, we expect the market to adjust in response to reduced costs of production. Technological advancements typically lead to an increase in supply, as they allow firms to produce more at a lower cost per unit. With increased supply and assuming demand remains unchanged, the market price typically falls, and total revenue could increase if the fall in price is not proportionately larger than the increase in quantity sold.
Exercise 12.2 Market Supply Curve Shifts
- Firms are required to pay a fine for their carbon dioxide emissions - Supply curve shifts to the left.
- Companies are sued for polluting the water - Supply curve shifts to the left.
- Power plants not required to address air quality emissions - Supply curve remains the same.
- Companies using fracking required to clean up damage - Supply curve shifts to the left.
Equilibrium Price Adjustments
- Fine for carbon dioxide emissions - Equilibrium price rises.
- Companies sued for water pollution - Equilibrium price rises.
- No requirement for power plants to address emissions - Equilibrium price stays the same.
- Fracking companies required to clean up - Equilibrium price rises.
Response to Increasing Input Costs
When an input becomes relatively more expensive, firms will seek alternative production technologies to minimize costs or find cheaper substitute inputs to maintain profitability.