Show the change in the firm''s equilibrium profit

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When natural gas prices rose in the first half of 2004, producers considered using natural gas fields that once had been passed over because of the high costs of extracting the gas (Russell Gold, "Natural Gas Is Likely to Stay Pricey," Wall Street Journal, June 14, 2004, A2).

a. Show in a figure what this statement implies about the shape of the natural gas extraction cost function.

b. Use the cost function you drew in part a to show how an increase in the market price of natural gas affects the amount of gas that a competitive firm extracts. Show the change in the firm's equilibrium profit.

Reference no: EM131324311

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