Marginal damage curve , Managerial Economics

Assignment Help:

Consider a model world which is subject to a risk of global climate change. The damage is known to be from greenhouse gas (GHG) emissions as indicated by the marginal damage curve (MD) in the figure below. The model world consists of two regions, the North and the South, which have difference in technologies for reducing GHG emissions and thus marginal abatement cost curves (MACN and MACS). Note that GHG emission in the North and in the South together threat global climate. Pushed by increasing awareness of environmental issues among public, the authorities in two regions agree to empower the UN to introduce and enforce whatever measures to reduce GHG emissions within technological constraints (i.e. MACN and MACs).

47_Marginal damage curve.png

The UN is to reduce the GHG emissions to efficient level through command-and-control approach.

(a) What will be the standards in the North and the South?

North:

South:

(b) What will be the total abatement costs in the North and the South under these standards?

North:

South:

The UN is, instead, to reduce the GHG emissions to efficient level through a simple (one-part) emission charge.

(c) What will be the appropriate level of charge?

(d) How much will be the total emission charges (paid taxes) in the North and the South respectively in the equilibrium?

North:

South:

(e) The burden of emission charges is a concern of the authorities in the North and the South. How can the UN address to this problem while keeping incentive-based strategies? Give two ways to reduce/get rid of the burdens ("introducing transferrable discharge permits", which is studied below, will not be credited here).

The UN is, instead, to reduce the GHG emissions to efficient level through transferable discharge permits (each permit allows emission of 1 ton/year).

(f) How many permits should the UN issue? How much will a permit cost in equilibrium?

(g) Design the initial allocation of permits so that the South can benefit from reduced GHG emissions completely free of charge.

North:

South:

(h) What will happen to the price of permit when, while keeping the number of transferable permits issued by the UN, the North transfers its environmental technologies to the South so that the South is as cost-efficient as the North in reducing GHG emissions?

(i) How much will the North and the South emit GHG in equilibrium then?

North:

South:

(j) Is this an efficient equilibrium? If not, what should the UN do to achieve efficiency, while continuing to follow transferable discharge permits?


Related Discussions:- Marginal damage curve

Nature of commodity and income elasticity, For all regular goods, income el...

For all regular goods, income elasticity is positive though the degree of elasticity fluctuates as per the nature of commodities. Consumer goods are generally categorised under thr

Rock-paper-scissors game, A mother is torn among choosing her son Leonardo ...

A mother is torn among choosing her son Leonardo and her daughter Meryl to have the last bar of chocolate in her cupboard. As both her children's needs the chocolate and she needs

Avoiding surplus and inadequate production, Q. Avoiding Surplus and Inadequ...

Q. Avoiding Surplus and Inadequate Production? Demand forecasting is essential for the new and old organisations. It is somewhat necessary if an organisation is engaged in larg

Marginal utility approach, Marginal utility approach The downward slop...

Marginal utility approach The downward sloping nature of the demand curve can be explained by using the law of diminishing marginal utility .  For instance, consider a consum

Production planning in demand forecast period, Q. Production Planning in de...

Q. Production Planning in demand forecast period ? Long term production planning can assist the management in organising long term finances on practical terms and conditions. S

Opportunity costs, Why do the inclusion of opportunity costs in cost-and-su...

Why do the inclusion of opportunity costs in cost-and-supply analyses help individuals make better decisions and improve outcomes?

Case let 2, is Indian companies running a risk by not giving attention to c...

is Indian companies running a risk by not giving attention to cost cutting?

Low fidelity prototyping technique, You have recently gained employment wit...

You have recently gained employment with a computer consultancy company. Due to your specialist knowledge in the areas of Human Factors and usability, your manager considers that y

Amount of labor , One lumber producer may locate a plant in the same area....

One lumber producer may locate a plant in the same area.  If it does, there will be more competition for labor and the labor supply function facing Northern will shift to

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd