Question

Identify whether the market supply curve will shift right or left or will stay the same for the following: a. Firms in an industry are required to pay a fine for their carbon dioxide emissions. b. Companies are sued for polluting the water in a river. c. Power plants in a specific city are not required to address the impact of their air quality emissions. d. Companies that use fracking to remove oil and gas from rock are required to clean up the damage.

Answer 1

1. In first example, supply curve moves to the left. Delivery curve moves to the left as supply is heading downward due to variables apart from rate change. In this scenario, the cost of output rises due to the current penalty, and vendors will be able to produce less at the same amount.

2. In second scenario, businesses are prosecuted for contaminating river water, rises in manufacturing prices and vendors will be able to produce worse at the same amount. The output curve then shifts for its left.

3. In third case the output curve will remain the same. That's since the quantities given does not change.

4. In this situation, the harm done by drilling must be cleaned up by the businesses. Hence, production cost rises, and vendors will be willing to provide worse at the provided price. The supply curves then shifts to the left.