MAE233 Business And Climate Change Assessment Solution For Economics Students

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Assignment Details:

• Referencing Styles : Harvard
• Course Code: MAE233
• Course Title: business and climate change
• Words: 1500
• University: Deakin University
• Country: AU

Questions:

Q1. Consider the N-Period, Constant-(Marginal)Cost, No-Substitute Case. Assume that TB=8q-0.1q2, TC=2q, r=8.22%, and that 13 units of resource have to be allocated so as to achieve a dynamically efficient allocation.

a. How long will the resource last?

b. Show that in each period the total marginal cost is equal to the price.

c. Show that the marginal user cost is increasing over time.

d. How would your answer to point a change if the discount rate was 17.94% rather than 8.22%?

In order to solve the system of equations you can use https://www.emathhelp.net/calculators/algebra-2/system-of-equations-solver/ or any other system of equations calculator.

Q2. Assume that the relationship between the growth of a fish population and the population size can be expressed as g = 3S(1 – S/2), where g is the growth in tons and S is the size of the population (in thousands of tons).

Assume that:

(i) the price of fish is p (constant and does not depend on the amount sold);

(ii) the marginal cost of a unit of fishing effort is constant and equal to c;

(iii) the amount of fish caught per unit of effort expended is proportional to the size of the fish population, H = 5 E S.

(iv) Compute the population size that is compatible with the maximum sustainable yield. What would be the size of the annual catch if the population were to be sustained at this level?

(v) What is the population size that is compatible with the efficient sustainable yield? c. What is the population size that is compatible with open access?

(vi) Compare and contrast the population size that is compatible with the maximum sustainable yield and the population size that is compatible with open access.

Q3. Suppose the state is trying to decide how many miles of a very scenic river it should preserve. There are 10 people in the community, each of whom has an identical inverse demand function given by P=5-2q, where q is the number of miles preserved and P is the per-mile price he or she is willing to pay for q miles of preserved river.

(i) If the marginal cost of preservation is $20 per mile, how many miles would be preserved in an efficient allocation? Illustrate graphically.

(ii) How large is the economic surplus? Illustrate graphically.

(iii) How would your answers to points a and b change if the marginal cost of preservation was $20q per mile? Illustrate graphically.

(iv) How would your answers to points a and b change if the marginal cost of preservation was $60 per mile? Illustrate graphically.

Q4. Consider the role of discount rates in problems involving long time horizons such as climate change. Suppose that a particular emissions abatement strategy would result in a $ 600 billion reduction in damages 30 years into the future. In order to achieve a $600 billion reduction in damages 30 years into the future a sizeable expenditure is required today.

(i) Assume that the discount rate is 10%. What is the highest expenditure today that can be justified on benefit-cost analysis grounds?

(ii) How would your answer to point a change if the discount rate was 2%, rather than 10%?

(iii) Is it likely that different people evaluating the same project will end up choosing different discount rates? Discuss.

(iv) What are the implications of a higher discount rate for the welfare of future generations?

Q5. Executive Order 13771 – entitled “Reducing Regulation and Controlling Regulatory Costs” – is an executive order signed by former U.S. President Donald Trump on January 30, 2017. It directs agencies to repeal two existing regulations for every new regulation, and to do so in such a way that the total cost of regulations does not increase.

(i) What does benefit-cost analysis have to say about this one-in, two-out prescription?

(ii) Any environmental regulation has pros and cons. Discuss.