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I'm struggling to calculate these practice questions could you help? Scientific evidence indicates that anthropogenic (human induced) emissions of greenhouse gases (GHG) contributes to global
I'm struggling to calculate these practice questions could you help?
Scientific evidence indicates that anthropogenic (human induced) emissions of greenhouse gases (GHG) contributes to global warming which is predicted to have considerable economic and environmental consequences globally. A key source of greenhouse gas emissions is the production of coal-fired electricity. The diagram below illustrates this market with the negative external cost of producing electricity.
- Using the diagram explain how an unregulated market leads to overproduction. (3 marks)
- What is the competitive market equilibrium? What is the efficient equilibrium? (2 marks)
- What is the area corresponding to the loss in profit for firms when moving from a competitive to efficient equilibrium? (2 marks)
- What is the total gain to society in moving from the competitive to efficient market equilibrium? (2 marks)
- Can the Coase Theorem be applied to correct this externality? Why? Why not? (3 marks)
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