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QUESTION
Suppose we have an economy with 3 sectors, each with the following valuation of carbon sequestration: MPB1=10 - Q MPB2=5-2Q MPB3=8-Q The marginal...
Suppose we have an economy with 3 sectors, each with the following valuation of carbon sequestration:
MPB1=10 - Q
MPB2=5-2Q
MPB3=8-Q
The marginal social cost of carbon sequestration is MSC = 15.
a.Graph the marginal social benefits of carbon sequestration using the vertical summation technique.
b.Find the social optimum amount of carbon sequestration (the one corresponding to the Bowen-Lindhal-Samuelson Condition).
c.Find how much each sector should pay in the socially optimum solution.
