week9

Question 1

Economic policies to adress climate change

Answer 1

• Government subsidies to R&D: since 1980s the government have provided billions of $ in subsidies for R&D dedicated to lowering the cost of clean energy sources
• Multilateral agreements: set common objectives and allocate burden-sharing across countries. Paris agreement (196 countries)
• Incentives for individual choices: through smart-metering, people are motivated to conserve energy

Question 2

Montreal Protocol

Answer 2

1987, banned the use of chlorofluorocarbons (CFCs)
CFC problem was showing itself immediately and urgently
Aimed for complete phaseout of specified chemicals according to specified schedules
Result: hole in the ozone layer has begun to recover and predit it will return to normal in 2070

Question 3

Kyoto Treaty

Answer 3

1997, international negotiations to address carbon emissions
37 industrialized nations agreed to combat global warning by reducing their emission of greenhouse gases to 5% below 1990 levels
Not ratified by US
Allowed for international emissions trading as long as the total emissions goals are met
Allows efficient countries to reduce their emissions on behalf of less efficient ones for a price

Question 4

Participation of developing countries

Answer 4

advanced economies produced only about 1/3 of all global emissions
an international trading system that included developing nations would reduce the cost of the Kyoto treaty by a factor of 4

developing nations object to this argument:claimed that it’s a result of environmentally insensitive growth by developed nations so why should they clean?
will involve significant international transfers of resources

Question 5

Classification of Goods

Answer 5

Rival + Excludable: PRIVATE GOOD (clothing)
Rival + Non-excludable: COMMON RESOURCE (clean water)
Non-rival + Excludable: ARTIFICIALLY SCARCE GOOD (digital music, computer software)
Non-rival + Non-excludable: PUBLIC GOOD (national defense, public sanitation)

Question 6

Market only supply private goods efficiently

Answer 6

Non-excludable goods tend to suffer from inefficiently low production (undersupplied) and have a free-rider problem

Goods that are excludable and non-rival suffer from inefficiently low consumption (underconsumed)

Question 7

Providing public goods

Answer 7

provided through:
- voluntary constributions
- individuals or firms who make money in an indirect way
- social encouragement or pressure in small communities
- the government

Question 8

How much a public good should be provided?

Answer 8

until marginal social benefit = MC

marginal social benefit=sum of the individual marginal benefits