1. The Rhine river runs through the heart of Western Europe and it eventually empties into the North Sea in the Netherlands. In fact, the river is heavily polluted generating damages for quite a few countries. Let's focus on the segment of the river that runs through Germany and the Netherlands. Due to the geography, Germany is located 'upstream' and the Netherlands is located 'downstream It is safe to assume that the emissions by Germany into the Rhine river negatively affects both Germany and the Netherlands, due to the fact that the Netherlands is located 'downstream. By the same reasoning we have no reason to believe that emissions into the river by the Netherlands will cause damages Germany as the water in the river only flows in one direction. a. Using our model from class, create a graph that illustrates an analysis of Germany's emissions into the Rhine that generates damages in both Germany and the Netherlands. Label your curves and axis accordingly. b. Without any policy intervention or international negotiation, how much is Germany likely to emit into the river? Mark out this level of emissions as e. c. Is the level of emissions in part b globally efficient? Why or why not? Use your graph from part a to answer this question. d. Suppose that Germany and the Netherlands enter a treaty where Germany is committing itself to only emitting the globally efficient level. Using your graph, how much will Germany pollute in this case? Mark this level of emissions e*. e. How much is the added abatement cost in Germany of this action? Label these areas in the graph clearly (call these areas X and Y). f. What is the value of the estimated benefits to Germany of this action? Label this area in the graph clearly (call this area Z). g. What is the value of the estimated benefits to the Netherlands of this action? Label these areas in the graph clearly (call these areas V and W). h. Suppose that a Polluter Pays treaty is implemented, who is responsible for the added abatement cost of Germany? Explain. Why would this type of treaty by less likely to be upheld over time? i. Suppose that a Victim Pays treaty is implemented, who is responsible for the added abatement cost of Germany? Explain. Be careful to distinguish between how much is paid by each country. Why would this type of treaty be more likely to be upheld over time?