Penalty tariff rate 0 percent 4 percent TABLE 1-EFFECTS OF PARTICIPATION IN NUMERICAL EXAMPLE -11.9 -11.9 US is participant Abatement Damages Trade 10.7 10.7 Net benefits 0.0 -1.2 36.7 35.5 US is not a participant Abatement Damages -0.3 -0.3 7.3 7.3 Trade 0.0 -15.6 Net benefits 7.0 -8.6 Net effect of participation -8.2 44.1 Notes: This table provides an illustration of the economic effects of participation for the US with and without a pen- alty tariff. The difference between the two lines is the impact of the penalty tariff. With a penalty tariff, the global externality is effectively internalized, giving incentives for self-interested countries to participate in the Climate Club. Figures in billions of 2011 US$ from the C-DICE model below for a global SCC of $25 per ton of CO2. able 1 is from Nordhaus (2015). Use the information provided to answer 1-4 1. What is the net benefit of participating in the climate agreement if there is no tariff? 2. What is the net benefit of not participating in the climate agreement if there is no tariff? 3. Construct the payoff matrix for two identical countries whose actions are "Participate" and "Do Not Participate" when there is no tariff. Assume that if either and/or both player(s) does not participate, benefits are equal to the answer from question 2. 4. Identify the Nash Equilibrium from the game set up in question 3.
Penalty tariff rate 0 percent 4 percent TABLE 1-EFFECTS OF PARTICIPATION IN NUMERICAL EXAMPLE -11.9 -11.9 US is participant Abatement Damages Trade 10.7 10.7 Net benefits 0.0 -1.2 36.7 35.5 US is not a participant Abatement Damages -0.3 -0.3 7.3 7.3 Trade 0.0 -15.6 Net benefits 7.0 -8.6 Net effect of participation -8.2 44.1 Notes: This table provides an illustration of the economic effects of participation for the US with and without a pen- alty tariff. The difference between the two lines is the impact of the penalty tariff. With a penalty tariff, the global externality is effectively internalized, giving incentives for self-interested countries to participate in the Climate Club. Figures in billions of 2011 US$ from the C-DICE model below for a global SCC of $25 per ton of CO2. able 1 is from Nordhaus (2015). Use the information provided to answer 1-4 1. What is the net benefit of participating in the climate agreement if there is no tariff? 2. What is the net benefit of not participating in the climate agreement if there is no tariff? 3. Construct the payoff matrix for two identical countries whose actions are "Participate" and "Do Not Participate" when there is no tariff. Assume that if either and/or both player(s) does not participate, benefits are equal to the answer from question 2. 4. Identify the Nash Equilibrium from the game set up in question 3.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
question 3 and 4 please
Transcribed Image Text:Penalty
tariff rate
0 percent
4 percent
TABLE 1-EFFECTS OF PARTICIPATION IN NUMERICAL EXAMPLE
-11.9
-11.9
US is participant
Abatement Damages
10.7
10.7
Trade
0.0
36.7
Net
benefits
-1.2
35.5
US is not a participant
Abatement Damages Trade
7.3
7.3
-0.3
-0.3
0.0
-15.6
Net
benefits
7.0
-8.6
Net effect of
participation
-8.2
44.1
Notes: This table provides an illustration of the economic effects of participation for the US with and without a pen-
alty tariff. The difference between the two lines is the impact of the penalty tariff. With a penalty tariff, the global
externality is effectively internalized, giving incentives for self-interested countries to participate in the Climate
Club. Figures in billions of 2011 US$ from the C-DICE model below for a global SCC of $25 per ton of CO₂.
Table 1 is from Nordhaus (2015). Use the information provided to answer 1-4
1. What is the net benefit of participating in the climate agreement if there is no tariff?
2. What is the net benefit of not participating in the climate agreement if there is no tariff?
3. Construct the payoff matrix for two identical countries whose actions are "Participate" and "Do Not
Participate" when there is no tariff. Assume that if either and/or both player(s) does not participate,
benefits are equal to the answer from question 2.
4. Identify the Nash Equilibrium from the game set up in question 3.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education