Table 10-3 reports that the estimated long-run elasticity of supply for natural gas in the United States is about 0.5. Hence, over the long term we can expect each 10 percent increase in natural gas production to be accompanied by a 20 percent
rise in relative price. Which interpretation (if either) of this fact is correct?
1. New firms should flock to this industry because it will be very profitable.
2. Existing firms will do very well in this market