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Given the impact of "fracking", would you expect the profits of natural gas producing firms to increase or decrease in the short-run? Why?
Would these firms produce more or less natural gas? Why? Please use the short-run model of a firm in perfect competition to explain your answer.
Since the development and incorporation of "fracking", the prices of natural gas have decreased dramatically and evidence suggests that this price will remain low for a number of years to come. Would this suggest that the industry is subject to long-term economies or diseconomies of scale? Would this be consistent for a capital intensive industry? Please explain.
What condition would have to be met for a firm to shut down in the short-run? Leave the industry in the long-run?
If the production of natural gas is a highly competitive industry, would firms be able to earn economic profits in the long-run? What about accounting profits?
Constrained optimisation model
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