ECON1020 – PRINCIPLES OF ECONOMICS 1

INDIVIDUAL ASSIGNMENT

Total Marks 35 | Weighting 30%

IMPORTANT INFORMATION: READ BEFORE YOU START

SUBMISSION

• The assignment must be submitted via Turnitin by 2pm Wednesday April 21, 2021. The submission link is available under the ‘Assessment Tasks’ tab on iLearn.

• No extensions will be granted except for the cases where an application for Special Consideration has been approved. For further details, see the University’s Special Consideration policy.

• Late submission will incur a penalty of 10% per day of total available marks.

• New submissions will not be accepted beyond 72 hours past the submission deadline.

• Re-submissions are allowed until the deadline. After the deadline, no re-submissions are allowed under any circumstances.

• Note: you will not be able to see your Turnitin originality report until the deadline has passed.

DOCUMENT PREPARATION

• Prepare your answers in one document using word processing software (e.g. Microsoft Word).

• Written answers should be typed using a standard font (e.g. Times New Roman, Calibri, Arial). Hand-written answers (except for the diagram in Question 9) will not be marked.

• Do not add a cover page to your assignment or repeat the text of the questions in your submissions (simply answer questions in order, denoting Q1, Q2, Q3… etc.).

• Written answers should not exceed the maximum word limit stated in each question. Any words written exceeding the limit will not be assessed. Note that this is a maximum word limit, you may answer the question in fewer words if desired.

• Diagrams can be hand-drawn or electronically drawn and must be inserted into your answer document.

o One way to insert a hand-drawn diagram is to take a photo of the diagram hand-drawn on paper, send it to your computer via email, copy it into your document, and then crop as required.

o Applications for electronically drawn economic models include Microsoft Word, Microsoft OneNote, and Google Drawings (see these YouTube tutorials for tips on how to get started).

• Save your answer document as .doc, .docx or .pdf format. The extension .pages will not be displayed in Turnitin which means that it cannot be assessed.

UNACCEPTABLE ACADEMIC ACTIVITIES

• Recall “what is okay” and “what is not okay” from the Academic Integrity Module. Unacceptable academic activities will initiate the student disciplinary procedure and result in zero marks. They include, but are not limited to, contract cheating, collusion, plagiarism, and self-plagiarism. Details about academic integrity can found here: MQ academic honesty policy.

• This is an individual assignment. Writing answers together is not authorised hence is categorised as collusion. You may discuss with other students at the preparatory stage. However, the final version of the assignment should be written in your own words.

• Note that Turnitin will compare your submission against others’ as well as internet sources. The Turnitin originality report will be made available to students after the deadline.

MARKING

• A detailed rubric is provided on the last page.

• Given the size of the cohort, the entire marking process can take up to three to four weeks. There will be an announcement on iLearn when the marks are released.MACQUARIE

CLIMATE CHANGE AND THE SWITCH TO CLEAN ENERGY

PART A

Carbon dioxide levels in the atmosphere today are higher than at any point in at least the past 800,000 years. The risks associated with the resultant climatic change have been well documented.

We can model the problem of climate change as a game between two groups: developing nations and developed nations. In this game, each group can choose from one of two possible climate strategies:

• Abate: governments enact policies to reduce carbon emissions, for example, by subsidising clean energies or taxing fossil fuels.

• No change: governments fail to enact policies to reduce carbon emissions. Businesses and individuals are free to pursue their own self-interest.

The outcomes and payoffs of this game are shown in Figure 1 below.

Figure 1: Outcomes and payoffs for the climate strategy game.

Question 1

What is the Nash equilibrium of the game shown in Figure 1? Show the steps you took to reach this conclusion. Is this Nash equilibrium a prisoners’ dilemma? Why or why not? [2 marks] [max words: 100]

Question 2

Suppose there is a change in social preferences in both developing and developed nations. Figure 2 shows the new payoffs for the climate strategy game in this case. What are the Nash equilibria of this game? Show the steps you took to reach this conclusion. [2 marks] [max words: 100] MACQUARIE

Figure 2: Payoffs for the climate strategy game with social preferences.

Question 3

The ideal outcome for the climate strategy game is one in which a dominant strategy equilibrium is achieved when both groups of countries choose to abate emissions. Explain how a change in the rules of the game could lead to a potential solution to the social dilemma of climate change. [3 marks] [max words: 200]

PART B

Emissions reduction treaties between nations have been proposed as a key method with which to tackle climate change and its negative impacts. One such treaty is the Paris Agreement. Adopted by 197 nations in 2015, the deal aims to substantially reduce carbon emissions and to limit the global temperature increase in this century to 2 degrees Celsius.

A summary of the Paris Agreement can be found here.

The Paris Agreement includes commitments from all nations to reduce their emissions and work together to adapt to the impacts of climate change and calls on a strengthening of commitments over time. The agreement provides a pathway for developed nations to assist developing nations in their climate mitigation and adaptation efforts. Nations can set their own ‘nationally determined contributions’ towards emissions reductions that reflect their capabilities, level of economic development, and contribution to emissions over time.

Question 4

Binding treaties to abate emissions between groups of nations are often difficult to achieve. Explain why this is the case. You must cite at least one reputable source from your own research. Include the full reference at the end of your answer, which will not count towards the word limit. Use a standard referencing system (e.g. Harvard style). [3 marks] [max words: 200]

Question 5

Discuss three reasons why the Paris Agreement treats developing nations differently from developed nations. You must cite at least one reputable source from your own research. Include the full reference at the end of your answer, which will not count towards the word limit. Use a standard referencing system (e.g. Harvard style). [3 marks] [max words: 200]

Question 6

Evaluate the decision to distinguish between developed and developing nations in the Paris Agreement from the perspective of substantive and procedural judgements of fairness. Be sure to define both judgements of fairness in your answer. [5 marks] [max words: 500]

Question 7

The Paris Agreement is based on voluntary carbon emissions reduction pledges made by participating nations. Using either a consequentialist or a deontological framework, discuss if it would be ethically acceptable to legally impose these emission reduction pledges and enforce these goals with penalties? Explain your reasoning. Be sure to define your chosen ethical framework in your answer. [5 marks] [max words: 500]

PART C

Moving a nation’s source of power from fossil fuels (such as coal) to clean energy sources (such as solar) can reduce carbon emissions.

Suppose the price of a unit of coal (PC) is $50 and the price a unit of solar (PS) is $30. A representative power plant can use a mixture of coal and solar inputs to produce one unit of electricity.

The power plant has two types of technologies available to them to produce one unit of

Assume that the power plant uses no other inputs in its production process.

Question 8

Calculate the production costs required for the two types of technology to produce one unit of electricity. Show your workings. Which technology would the power plant choose? [2 marks] [max words: 100]

Question 9

Using an isocost diagram, model a change in relative prices that would incentivise a shift in technologies from the choice you indicated in your answer to Question 8. On your diagram, be sure to state the new prices and include all isocost lines (before and after the change in prices). Label the intercepts and slopes of the isocost lines and show the resultant choice of technologies, along with their associated quantities before and after the change in prices. Calculate the innovation rent that arises due to this switch in technologies, show your working. [10 marks] [max words: 100]

DOCUMENT PREPARATION CHECKLIST

BEFORE YOU SUBMIT

☐ My assignment is written in full sentences and clear formal language.

☐ My assignment is proofread, and errors and typos are minimised.

☐ My assignment is written within the word limit for each question.

☐ Diagrams are drawn clearly and fully labelled. Poorly drawn diagrams reflect poor communication which may result in loss of marks.

☐ Diagrams are not distorted and are properly inserted into the document.

☐ I have read the rubric on the next page and made sure that my assignment meets the criteria.

AFTER YOU SUBMIT

☐ I have double-checked whether the document was properly uploaded.

☐ I have received the Turnitin receipt via email.

☐ I have seen my originality report (generated after the deadline).