Policy Response to Decreased Input Costs
If the input costs for solar panel manufacturers decrease, which of the following policy actions would most effectively ensure that the cost savings lead to both higher profits and increased social welfare?
Encourage technology innovation and competition by offering tax incentives for R&D while monitoring market power and corporate behavior.
Legislate mandatory adoption of solar panels across industries, leading to unintended effects on the non-renewable sector and competition.
Grant permanent subsidies to solar panel manufacturers, strengthening their market position but ignoring long-term dynamic effects.
Impose price floors on solar panels, destabilizing market forces and preventing potential monopoly pricing.
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