Evaluating Policy Support for a Maturing Technology
A specific renewable energy technology has shown a consistent and dramatic price decrease over several decades, strongly correlated with increases in its global production volume. It has now reached a point where it is cost-competitive with traditional energy sources. Given this established trend, critically evaluate the continued use of large, direct government subsidies to consumers for purchasing this technology versus shifting government support towards funding advanced research and development (R&D) for the next generation of the technology. Justify which policy approach is likely to be more effective for long-term progress in the energy sector and explain the potential economic drawbacks of the less effective option.
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.2 Technology and incentives - The Economy 2.0 Microeconomics @ CORE Econ
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Relationship Between Capacity and Cost in Figure 2.22
Source for Figure 2.22: Lafond et al. (2017) on Experience Curves
Source for Figure 2.22: IRENA (2020) on Solar PV Capacity and Prices
Evaluating a Green Technology Investment
Historical data for a key renewable energy technology reveals a strong, consistent trend over several decades: as the cumulative global production volume increases, the cost per unit reliably decreases. When plotted, this relationship forms a nearly straight, downward-sloping line. An analyst observing this long-term pattern would most reasonably conclude that:
Interpreting Production Cost Trends
Historical data for a specific type of solar panel shows a consistent relationship between production volume and price. For every tenfold increase in the total number of panels produced globally, the price per panel has been cut in half. If the price was $80 per panel when 1 million units had been produced, what would the price be expected to be when the total production reaches 100 million units?
A well-established principle for a certain manufacturing technology shows that its unit cost is consistently cut in half for every tenfold increase in cumulative production volume. Based on this principle alone, it is reasonable to predict that the unit cost will eventually become zero.
Evaluating Policy Support for a Maturing Technology
A new energy storage technology is being developed. Which of the following scenarios would provide the strongest evidence that this new technology is likely to follow a similar long-term cost reduction path as has been observed in other successful green technologies, where costs decrease predictably as production scales up?
A manufacturing firm is considering entering a market for a mature technology that has shown a consistent, decades-long pattern of cost reduction directly linked to increases in global production volume. Which of the following strategic decisions would be the most financially risky for this firm, based solely on this market characteristic?
A specific type of renewable energy technology has demonstrated a consistent, long-term trend: for every tenfold increase in cumulative global production, the unit cost is cut in half. This technology has now reached a point where building new installations is often cheaper than building new fossil fuel plants. A government is debating whether to continue providing subsidies to consumers who install this technology. Which of the following statements presents the most compelling economic argument based on the described trend?
A specific type of green technology has shown a consistent, long-term trend where its unit cost decreases as cumulative production volume increases. Match each characteristic or phase of this trend to its most direct economic implication.
Learning Curve Effect on Photovoltaic Cell Prices
Ratio Scale in Figure 2.22