You run a coal mine. As the coal producer you know you have an upward sloping marginal cost curve. You know that most na

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You Run A Coal Mine As The Coal Producer You Know You Have An Upward Sloping Marginal Cost Curve You Know That Most Na 1 (37.86 KiB) Viewed 33 times

You run a coal mine. As the coal producer you know you have an upward sloping marginal cost curve. You know that most natural gas and most coal is used to produce electricity and that electricity producers will mostly use whichever is cheapest. When the monthly price of natural gas is $8/mBTUs, the price of coal is $100/ton. Now because of an explosion (not literally) of shale gas entering the market, the monthly price of natural gas falls to $3/mBTUs. Do you expect the amount of coal you supply to increase or decrease? Do you expect the price of coal to increase or decrease? Explain the reasoning behind your answer. You are told that the cross price elasticity of demand between Justin Beiber albums and Calvin Klein underwear is a negative number. What does this mean for the relationship between Beiber albums and CK underwear? What would happen to demand for Beiber albums and CK underwear if the price of CK underwear fell?