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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
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 eamed carbon credits available when the program begins. Price of Carbon Credits $ 1,125 1, 225 1, 325 1,425 1,525 1,625 1,725 Quantity of Credits Created 40 70 180 14e 17e 280 230 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 $
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