Economics of the Environment

Question 1

Negative externalities: Pollution

Answer 1

• CO2 greenhouse gas, global warming, climate
• how to get decision in social interest
• MSC = M(p)C+MEC

Question 2

Fixing inefficciency

Answer 2

1) Property rights (ownership) so S=M(P)C=MSC
2) technology
3) Tax/price pollution
- also in inefficient Production quotas

Question 3

2 methods confronting pollutes cost

Answer 3

1) Pigovian Tax (increase P*Q = tax rev)

2) Cap and trade (upper limit Q)

Question 4

Coping with global emissions/tragedy of commons

Answer 4

• free rider problem, carbon tax
  1) Unsustainable (decreases stock)
  2) Inefficient (overusing) PFF