Need Assistance with this exercise, need some guidance with setting up a marginal damaged function.
DICE Manual is just for reference, can be found by googling it or here:
http://www.econ.yale.edu/~nordhaus/homepage/homepage/documents/DICE_Manual_100413r1.pdf
4. {8 points} Create a marginal abatement cost function for carbon emissions using the DICE model. a. d. (2 points] In the GAMS code for the DICE model, nd the equation for MCAEATHt} on page 100 of the user manual. This is the marginal cost of abatement in dollars per ton of CO2. In this equation, gbacktimeit] is the price of a carbonneutral backstop technology (such as wind or solar power). MIUlt} is emission control rate, or the fraction of the carbon emissions which are "controlled.\" MIU{t] is a value between 0 {no emissions controlled}, and 1 {all emissions controlled]. The variable expoost2 is a parameter for the exponent. Write Dr. Norhaus' equation for marginal cost per ton, MCIt, as a function of the backstop price, p, the fraction of emissions controlled, p, and the exponent, x. [In other words, use the variable p for "pbacktime,\" p for MIU, and x for expcost2.) [2 points] In the DICE model, the price of the backstop technology declines over time. However, for simplicity, assume that the backstop price, p, remains constant at the initial price, which variable "phack" in this model. Find Dr. Nordhaus' assumptions for the values of gback and x on page 97 of the user manual. Report those values here. In the DICE model, the price of the backstop technology is in 2005s but our global steadystate gross output is in 20205. Using a simple ination calculator (httgswwwxalcufator.netinflationcalculator.html], inate the pback value from 20055 to 20205. Report that value here. (2 points] Recall that the equation you reported in part 4.a is the marginal cost of controlling C02. You can convert this to an equation for carbon by simply multiplying it times 3.67. Substitute the values for p and xthat you reported in part 4.b {use the value of p in 20205) into the equation you found in part 4.a and multiply times 3.5? to obtain a value for the marginal cost per ton of controlling carbon, MClt, as a function ofthe fraction of emissions controlled, p.. (2 points] Assume that 50% of emissions are controlled {p=0.5]. What is the marginal cost of controlling the last ton of emissions