Question 1 (1 point) In the Total Economic Value framework,...

Question 1 (1 point) In the Total Economic Value framework, how are the economic benefits (use value) of ecosystems determined? based on their role in the carbon and water cycles based on their ability to generate revenue for the government based on their direct, indirect, and future use based on their size and location

Transcript

00:01 So, here the question is in part.

00:02 So, at part a we have to determine the optimal level of emission, optimal level of emissions.

00:12 So, we need to find the point at which mdc that is marginal damage cost equals to marginal abatement cost.

00:21 So, mdc is equals to mac.

00:23 The equations are given to us is like this 200 minus 2e, now solve for e, we got 0 .75e plus 2e is equals to 200 plus 6, here we got e is equals to 291.

00:49 Now, in the b part we need to talk about this drawer diagram.

00:52 So, you should create a graph here with emission on the horizontal axis, horizontal axis and cost on the vertical axis.

01:10 Plot the mac and mdc curve, optimal level is where two curve intersect, optimal level where two curve which are these two curve md and mac.

01:29 So, show the total damage cost as the optimum level you can shade the area under the mdc and mac curve up to the point level the total damage cost and total abatement cost.

01:41 Now, for the c part of the question here, so we have to answer when the firm is liable for damage, when firm is liable for damage caused by emission, it will have an incentive to reduce an emission, incentive to reduce emission to the optimal level.

02:09 This is because the firm will consider not only the direct cost of abatement but also the liability cost, also the liability cost associated with the excessive emission.

02:22 So, in the diagram from part b, we can say that the optimal level of emission is where mac and mdc intersect...

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