What is the total net benefit to all countries

Reference no: EM133490849

Question 1: Consider the case of greenhouse gas (GHG) sequestration (removal from the atmosphere) as a public good. Suppose there are 100 identical countries, each of which has an identical inverse demand function for carbon removal given by: P = 30 - 5 QD where Q p is the number of tons of GHGs removed from the atmosphere, and p is the marginal willingness to pay for removing carbon. Assume the marginal cost of sequestering GHGs is constant and $25 per ton. How many tons of GHs should be sequestered in order to maximize the total global surplus (achieve allocative efficiency)?

Question 2: What is the total net benefit to all countries of sequestering the optimal amount of GHGs? Absent cooperation, how much greenhouse gas sequestration would we expect to see (in equilibrium with free-riding)? Absent cooperation, what is the total net benefit to all countries from sequestration in equilibrium with free-riding?

Reference no: EM133490849

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