Consider the following decision by two countries: a small country (C1) and a largecountry (C2). When both countries cooprate and agree to an environmentalagreement, C1 receives 4 and C2 receives 5 units of benefit. When they do notcooperae, they incur costs of -1, and -2, respectively. The payoffs associated withother outcomes are described in the table below.Large country (C2)Agree to environmentalprotection (cooperate)Do not agree toenvironmental protection(do not cooperate)The Socially Optiomal outcome isThe Nash Equilibrium isAgree to environmental protection(cooperate)C1:4C2: 5C1: 2C2: 6[Choose ]Small country (C1)[Choose ]Do not agree to environmentalprotection (do not cooperate)C1:2C2: -3C1: -1C2: -2

Environmental protection initiatives to pursued by all government. However, common policy agreement…

Consider the following decision by two countries: a small country (C1) and a large country (C2). When both countries cooprate and agree to an environmental agreement, C1 receives 4 and C2 receives 5 units of benefit. When they do not cooperae, they incur costs of -1, and -2, respectively. The payoffs associated with other outcomes are described in the table below.

Consider the following decision by two countries: a small country (C1) and a large country (C2). When both countries cooprate and agree to an environmental agreement, C1 receives 4 and C2 receives 5 units of benefit. When they do not cooperae, they incur costs of -1, and -2, respectively. The payoffs associated with other outcomes are described in the table below.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter30: Market Failure: Externalities, Public Goods, And Asymmetric Information

Section: Chapter Questions

Problem 13QP: Economists sometimes shock noneconomists by stating that they do not favor the complete elimination...

See similar textbooks

Similar questions

cap-and-trade and windfall profitsA city called Seoul is suffering from high concentrations of mercury in the air, caused by burningcoal in power plants. There are two of these plants close to the city. The city’s mayor wants touse cap-and-trade to reduce emissions to a reportedly “safe” level of 60 tons. The two firms havethe following marginal benefits of emissions: MB1 = 100 – 2e1, MB2 = 25 – 0.5e2.a. How much mercury will each firm emit? What allowance price will prevail in themarket?Firm 2 hires a smart lobbyist who convinces the government that its profits are relatively low andthat it therefore deserves a generous allowance allocation. The government agrees and allocatesa1 = 20 allowances to firm 1 (for free) and a2 = 40 allowances to firm 2 (for free).b. What are the firms’ profits? Do any of the firms earn windfall profits? [Hint: compareprofits with and without regulation.] Windfall profits have been sharply criticized by consumer advocacy groups and politicians.c. What can…
Suppose instead of an emissions standard, the government implements atradeable permit system. Each firm is now given 3,000 permit each (1permit equals 1 ton of pollution allowed).How many permits will be traded between the 2 firms?
Two countries the US (U) and Fiji (F). Each country i E {U, F} can decide whether to impose a positive tax on the emissions of its polluting firms (t;> 0) or to impose no tax (t; = 0). We can think of a representative firm that chooses whether to produce using a polluting technology (q = P) or a clean technology (q = C). The polluting technology generates profits of (P) = 11. The clean technology generates profits of л(P) = 10 and doesn't have to pay tax. Imposing a tax of t = 1, profits of firms using polluting technology would equal profits of firms using clean. Assume that when the firm is indifferent between the two technologies, it chooses the clean technology. technology. Let us now turn to the decisions that the governments would make if they were inde- pendently choosing whether to impose a tax or not. In the US, firms using the clean technology emit a total of 0 tonnes of CO2 emissions, while firms using the polluting technology emit a total of 900 tonnes of CO2 emissions. In…
ASAP
There are two firms, A and B emitting sulfur dioxide. In total, they emit 100 tons of sulfur dioxide. The EPA wants to reduce sulfur dioxide emissions by 60 tons so that the final level of emissions in only 40 tons. The table below shows the emissions and cost of abatement for each firm. If the EPA were to issue 40 tradeable pollution permits, 20 to each firm, where each pollution permit allows 1 ton of emission, what would the final allocation of permits across the two firms be if they traded permits with esch other? sO, Emission Cost per ton of so, reduction Company Firm A 30 tons $1,000 per ton Firm B 70 tons $800 per ton Total Emissions 100 tons Select an answer and submit. For keyboard navigation, use the up/down arow keys to select an answer. a Each firm will have 20 permits. b. Firm A will have all 40 permits. Firm A will have 30 permits and Firm B will have 10 permits. Firm A will have 10 permits and Firm B will have 30 permits.
Two countries the US (U) and Fiji (F). Each country i E {U, F} can decide whether to impose a positive tax on the emissions of its polluting firms (t;> 0) or to impose no tax (t; = 0). We can think of a representative firm that chooses whether to produce using a polluting technology (q=P) or a | clean technology (q = C). The polluting technology generates profits of л(P) = 11. The clean technology generates profits of л(P) = 10 and doesn't have to pay tax. Assume that when the firm is indifferent between the two technologies, it chooses the clean technology. Imposing a tax of t = 1, profits of firms using polluting technology would equal profits of firms using clean technology. Let us now turn to the decisions that the governments would make if they were inde- pendently choosing whether to impose a tax or not. In the US, firms using the clean technology emit a total of 0 tonnes of CO2 emissions, while firms using the polluting technology emit a total of 900 tonnes of CO2 emissions. In…
Problems and Applications Consider two types of cars: gasoline-powered cars and electric cars. Because conventional gasoline-powered cars burn fuel during their operation, people who drive gasoline-powered cars impose a externality on the society. A policy implication of this result is a those who drive gasoline-powered cars. Because electric cars help reduce greenhouse gas emissions, people who drive electric cars impose a externality on the society. A policy implication of this result is a those who drive electric cars.
Two countries the US (U) and Fiji (F). Each country i E {U, F} can decide whether to impose a positive tax on the emissions of its polluting firms (t¡> 0) or to impose no tax (t; = 0). We can think of a representative firm that chooses whether to produce using a polluting technology (q = P) or a clean technology (q = C). The polluting technology generates profits of л(P) = 11. The clean technology generates profits of л(P) = 10 and doesn't have to pay tax. Assume that when the firm is indifferent between the two technologies, it chooses the clean technology. Imposing a tax of t = 1, profits of firms using polluting technology would equal profits of firms using clean technology. Let us now turn to the decisions that the governments would make if they were inde- pendently choosing whether to impose a tax or not. In the US, firms using the clean technology emit a total of 0 tonnes of CO2 emissions, while firms using the polluting technology emit a total of 900 tonnes of CO2 emissions. In…
Two countries the US (U) and Fiji (F). Each country i E {U, F} can decide whether to impose a positive tax on the emissions of its polluting firms (t¡> 0) or to impose no tax (t¡ = 0). We can think of a representative firm that chooses whether to produce using a polluting technology (q=P) or a clean technology (q = C). The polluting technology generates profits of л(P) = 11. The clean technology generates profits of л(P) = 10 and doesn't have to pay tax. Assume that when the firm is indifferent between the two technologies, it chooses the clean technology. Imposing a tax of T = 1, profits of firms using polluting technology would equal profits of firms using clean technology. Let us now turn to the decisions that the governments would make if they were inde- pendently choosing whether to impose a tax or not. In the US, firms using the clean technology emit a total of 0 tonnes of CO2 emissions, while firms using the polluting technology emit a total of 900 tonnes of CO2 emissions. In…
An important question in economics is how to minimize the total cost of pollution reduction (called the abatement cost, which is considered a "cost to society"). Two companies, Fim 1 and Firm 2, each emit 10 units of pollution per year. The table below shows the total cost for each company to reduce its pollution to a given value x. Due to technology differences, is more expensive for Fim 2 to reduce pollution than for Firm 1. When x = 10, no abatement has occurred (it is "business as usual"); when x = 0, no pollution is emitted. The table also shows an algebraic formula for each abatement cost. (BTW, it is a common economic approximation that abatement cost goes up quadratically.) Below, we solve this for two firms, but the method is applicable to a situation with multiple firms. Per-firm pollution emissions x Firm 1 total abatement cost = (10-x) where x is the amount of pollution Firm 2 total abatement cost = (20-2x) where x is the amount of pollution 1. 3. 4. 9. 7. 8. 6. 10 100 81…
There are two towns, A and B, each with a plant emitting pollution. The emission from plant Ais uniformly distributed across both town A and B. The emissions from plant B are local to town B. Despite the difference in affected area, the marginal benefit to either town of abating one unit of pollution from either source is the same, MB(Qi) = 17 − Qi per person, where Qi is total emissions abated from town i’s air. The marginal cost of abatement at plants A and B are MCA(qA) = 200qA and MCB(qB) = 100qB, respectively. If town A has 300 citizens and town B has 200, what is the efficient tax to set at each plant?
This is a two-player, simultaneous one-move game represented as a game table (normal form). What is the pure strategy Nash equilibrium outcome if there is one? Is this a socially optimal outcome? If not, which outcome is preferred?