Within the remote nation of New Hope, total industrial production is currently creating a constant level of GDP that results in 2,600 million tonnes per year of carbon being released into the atmosphere. The government announced three years ago that a cap on carbon emissions of 2,430 million tonnes would be imposed. This triggered the creation of new firms that began to plant large plantations of trees grown specifically to absorb carbon from the atmosphere and thus earn carbon credits that they would sell to the highest bidder. See table below for the supply of these earned carbon credits available when the program begins. Quantity of Credits Price of Carbon Credits Created $ 1,125 40 1,225 70 1,325 100 1,425 140 1,525 170 1,625 200 1,725 230 a. What will be the initial price for carbon credits? Initial price $ Next, assume that new technology enables the same level of GDP to be achieved with 5 percent less carbon emissions. b. Now what is the price of carbon credits? Price $

Within the remote nation of New Hope, total industrial production is currently creating a constant level of GDP that results in 2,600 million tonnes per year of carbon being released into the atmosphere. The government announced three years ago that a cap on carbon emissions of 2,430 million tonnes would be imposed. This triggered the creation of new firms that began to plant large plantations of trees grown specifically to absorb carbon from the atmosphere and thus earn carbon credits that they would sell to the highest bidder. See table below for the supply of these earned carbon credits available when the program begins. Quantity of Credits Price of Carbon Credits Created $ 1,125 40 1,225 70 1,325 100 1,425 140 1,525 170 1,625 200 1,725 230 a. What will be the initial price for carbon credits? Initial price $ Next, assume that new technology enables the same level of GDP to be achieved with 5 percent less carbon emissions. b. Now what is the price of carbon credits? Price $

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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