If the government subsidizes the production of wind energy, then the industry produces
A)more energy in the short run and firm entry occurs in the long run.
B)more energy in the short run and firm exit occurs in the long run.
C)less energy in the short run and firm entry occurs in the long run.
D)less energy in the short run and firm exit occurs in the long run.
E)the same amount of energy in both the short run and long run.

Question

Quizplus · Accepted Answer

Subsidies lower the cost of production for wind energy, making it more profitable. In the short run, existing firms will increase production due to the lower costs and higher profitability. In the long run, the increased profitability attracts new firms to enter the market, further increasing the industry's output.

If the Government Subsidizes the Production of Wind Energy, Then