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1. Outline the nature of the two most costly environmental problems that Iran faces.
The two most costly environmental problems that Iran faces are the land degradation and
water degradation. Degradation of land is mainly because of deforestation that can lead to the
increasing number of floods. Meanwhile, water degradation is because of water is being
overexploited leading to excessive usage of water. Moreover, the intensive farming techniques
have make it worse.

2. Why might these problems be caused by a failure of markets to include externalities

in the resource allocation decisions of consumers and producers?
Externalities is the decision of producers and consumers that affect the third party which
is the society. In this problem, the negative externalities happened due to they failed to take a
good care of their environment. The disaster such as flood happened due to drain blockage can
also cause the water pollution. Moreover, due to deforestation the local inhabitants had depleted
because the local citizen do not have shelter so they will be exposed to the harm. Deforestation
and the erosion of wetland can cause the variation of bio-diversity had decreased.
Next, in terms of water degradation mostly it had impact on health which is about 78%
damage as shown in the Figure 9. Sub-standard quality and inadequate quantities of water for
drinking and hygienic purpose and inadequate sanitation facilities lead to waterborne illness and
mortality. This happened because of the water in Iran are being overexploited and thus lowering
the water table. Other than that, diarrhea also will takes place among the children. Therefore, the
consumers have to bear the costs of visits the doctor and medicine. If they did not been cure, the
life expectancy of Iran will decrease in future.
Lastly, the problem of air pollution. Most of the pollution occur in the urban area as the
urban area are including the huge factory, usage of car and open-burning. Air pollution enables
the presence of particulates which could leads to chronic bronchitis and other respiratory
problems. As a result, it will give negative impact to the society such as their rate of health will
decrease due to these diseases . The death rate because of the air pollution will rise over time.

These three types of pollution cause a negative externalities that affect the external costs
where MSC exceed MPC. The point A is market equilibrium point such that MPC = MPB while
point B will be the social optimum point where MSC = MSB. Then, the region of area ABC will
present the net welfare loss to the society.


Evaluate whether Iran should ignore the concept of sustainable development if this
means that it can boost production of essential goods such as food and energy.
Sustainable development does include economic growth, environmental protection and
social equality and also defined as improving the quality of human life while living within the
carrying capacity of supporting ecosystem. In this case, the main issue is environmental
protection which degraded the environment in Iran.
Deforestation is needed in order to open a new farms or creating a new dam for the
energy production. Sometimes the government have to make the trade-off (degradation of
environmental) so they could satisfy the basic needs of increased of the population. Human
needs food and energy to survive. Therefore, Iran have to ignore the pollution occur so they can
fulfil the essentials of the population.
However, deforestation had led to lower crop field due to increase of soil salinity which
is opposite with the governments aim. The government also have to increase the expenditure on
the farming incentive so the soil salinity could be eliminated implying that the resources (budget)
should be spend on other sector. Hence, the governments objective cannot be achieved since the
deforestation does have negative impact on food production.
Other than land, water does contributed to the environmental degradation. Some wells are
now dry and new wells have had to be dug as stated in the passage leading to the water
degradation is happened in order to find another water resources that sufficient for the locals.
Soil erosion due to more intensive farming techniques which satisfy the foods supply should be
consider as one of the producers incentive to help providing foods. Therefore, Iran have to ignore
the concept of sustainable development .

However, the water pollution and scarcity of water will affect the health state of the
citizens of Iran. The water pollution will reduce the access of the citizens to the clean water to
fulfill their basic needs. Thus, the malnutrition and dehydration will reduce the life expectancy of
the citizens. The standard of living will be reduced even though the they are getting the sufficient
foods supply.
By highlighting the air pollution, most of indoor pollution are caused by burning of
woods and biomass fuel for cooking and heating. Human needs these energy in their daily life to
survive, like in Iran, many of the citizens are still using firewood to cook at home. Even though it
is true the burning of woods could lead to mass air pollution but the locals need the energy to
cook food to eat and boil the water for drinking. Thus, there is nothing can be done to concern
more on environmental if the lifestyles of Iran do not be upgraded.
Nevertheless, in long term the effect of releasing too much carbon dioxide would distort
the economy. For instance, a worker would ask for a leave letter from the clinic due to health
problem which would disturb the productivity of the place he works or the provision of public
goods such as public hospitals would be hugely under-provision since there are many of people
are coming to get a treatment on health caused by the air pollution. This would lead to more
government expenditure instead of only maintaining the weaver of environmental protection.
Hence, in the long run Iran have to spend more on healthcare due to air degradation.