MICROECONOMICS

As an economic advisor to the president, you have been asked to discuss cap and trade issues at the next cabinet meeting. The president has asked that you focus your remarks on the following key points:

• An explanation of cap and trade
• An explanation of cap and tax
• The economic benefits of using a command and control approach (including the costs and benefits through cap and tax)
• The economic benefits of using a market-based approach through cap and trade

In addition to the key points above, discuss the following:

• The negative and positive externalities that play a role in the ultimate policy decision to reduce greenhouse gases
• Is there anything that can be done to help reduce greenhouse gases without global cooperation?  If so, explain.