Consider the case of carbon dioxide being emitted into the atmosphere. Assume that a ton of (mathrm{CO}_{2})
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Consider the case of carbon dioxide being emitted into the atmosphere. Assume that a ton of \(\mathrm{CO}_{2}\) emitted decays at a very slow rate; assume only \(1 \%\) of the stock in the atmosphere decays in any given year. Also assume that the marginal damage in dollars per ton of \(\mathrm{CO}_{2}\) in the atmosphere is \(\$ 1\) per ton per year regardless of the amount of \(\mathrm{CO}_{2}\) in the atmosphere. Using a discount rate of \(3 \%\) per year, calculate the marginal damage caused by emitting 1 ton of \(\mathrm{CO}_{2}\) into the atmosphere. What \(\mathrm{CO}_{2}\) emission fee would you recommend to control this greenhouse gas problem?
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