The factors of production — practice question

Source text: Is there a future for Australian coal? Australia is one of the world’s major coal producers. Most coal is burned to generate electricity, and this releases carbon dioxide. In recent years, worldwide demand for coal has fallen as countries have tried to cut pollution. As a result, there has been a move towards, for example, gas, offshore wind and solar power. Coal is extracted in all six of Australia’s states, although most comes from Queensland and New South Wales. In Queensland, some firms are extremely large. They employ both low-paid, unskilled workers and highly paid specialist mining engineers, site managers and accountants. These firms also rely on the newest excavators, mining drills, crushing equipment, earth movers and drones to spot maintenance problems. Coal can be kept in storage to respond to changes in market conditions, but storage costs can be high. It may also take several years to build a new coal mine. Table 1.1 shows the output and consumption of the seven largest producers in 2020. Global coal output has declined in recent years as most countries have switched to renewable energy sources. Even so, there are some countries where coal output is expected to rise. For instance, Australia and India both have plans to open new coal mines. The Indonesian government places a maximum price on coal so that its power stations are encouraged to use it. Australia’s coal industry adds to the government’s tax revenue. However, Australia’s budget balance is also affected by other factors, including changes in tax rates and state support for some industries in the country.