Regulating for climate is often one where policy makers seek to minimize costs given that future benefits are sometimes uncertain in magnitude and timing. Suppose there are two climate strategies, one of which requires total cost of 1,000,000 dollars spent now, and another that includes a stream of costs equal to 21,000 dollars per year forever, starting next year. If the discount rate is 2%, which strategy should the government implement?

Present value analysis can be considered as one better way in understanding the alternative where an…

Answered: Regulating for climate is often one…

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter14: Environmental Economics

Section: Chapter Questions

Problem 4SQ

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Regulating for climate is often one where policy makers seek to minimize costs given that future benefits are sometimes uncertain in magnitude and timing. Suppose there are two climate strategies, one of which requires total cost of 1,000,000 dollars spent now, and another that includes a stream of costs equal to 21,000 dollars per year forever, starting next year. If the discount rate is 2%, which strategy should the government implement?

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