Regulating for climate is often one where policy makers seek to minimize costs given that future benefits are sometimes uncertain in magnitude and timing. Suppose there are two climate strategies, one of which requires total cost of 1,000,000 dollars spent now, and another that includes a stream of costs equal to 21,000 dollars per year forever, starting next year. If the discount rate is 2%, which strategy should the government implement?

Regulating for climate is often one where policy makers seek to minimize costs given that future benefits are sometimes uncertain in magnitude and timing. Suppose there are two climate strategies, one of which requires total cost of 1,000,000 dollars spent now, and another that includes a stream of costs equal to 21,000 dollars per year forever, starting next year. If the discount rate is 2%, which strategy should the government implement?

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter17: Market Failure: Externalities, Public Goods, And Asymmetric Information

Section17.3: Environmental Policy

Problem 2ST

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