Within the remote nation of New Hope, total industrial production is currently creating a constant level of GDP that results In 1,900 million tonnes per year of carbon being released into the atmosphere. The government announced three years ago that a cap on carbon emissions of 1,745 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 earned carbon credits available when the program begins. Price of Carbon Credits $ 875 975 1,075 1,175 1,275 1,375 1,475 Quantity of Credits Created 50 60 95 125 155 185 215
Within the remote nation of New Hope, total industrial production is currently creating a constant level of GDP that results In 1,900 million tonnes per year of carbon being released into the atmosphere. The government announced three years ago that a cap on carbon emissions of 1,745 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 earned carbon credits available when the program begins. Price of Carbon Credits $ 875 975 1,075 1,175 1,275 1,375 1,475 Quantity of Credits Created 50 60 95 125 155 185 215
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Within the remote nation of New Hope, total industrial production is currently creating a constant level of GDP that results in 1,900
million tonnes per year of carbon being released Into the atmosphere. The government announced three years ago that a cap on
carbon emissilons of 1,745 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 earned carbon credits available when the program begins.
Price of
Carbon
Credits
$ 875
975
1,075
1,175
1,275
1,375
1,475
Quantity of
Credits
Created
50
60
95
125
155
185
215
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 emisslons.
b. Now what is the price of carbon credits?
Price $
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