Harmful Effects On The Environment And Surrounding Agricultural Lands Are The Negative Externality Effects Associated With Coal Seam Gas

1691 Words7 Pages
Name: Mirwan Md Nahar
Student ID: 752521
Tutor’s name: Joey Maloney
Tutorial day: Friday
Tutorial time: 12pm
Subject: ECON10004

PART A

Question 1

1a) The harmful effects on the environment and surrounding agricultural lands are the negative externality effects associated with coal-seam gas. This stems from problems such as the exhaustion and/or contamination of clean water resources.

1b)

As seen from figure one, negative externality creates a social marginal cost that is substantially higher than the actual level of coal-seam gas mining (private marginal cost). It is evident that coal seam mining has an ‘un-priced’ cost, which is not included in the private marginal cost. Therefore, it results in a larger quantity being traded ‘Q1’, compared to what is considered as the quantity desirable from a social standpoint ‘Q2’.

Question 2

2a) Barriers to entry are at time in place to prevent other firms from joining monopoly or oligopoly markets. An example of a barrier entry for Monsanto in forming their market power is through government-created monopoly. As a result of the US government patenting and establishing legislation, Monsanto has the ability to “license” its product and other companies are unable to produce a product identical to it unless granted to. This leads to Monsanto gaining market power, as it is the only legal entity that is able to supply these patented seeds for a period of time.

2b) Patent laws protect the rights of inventors as it

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