Suppose that there are two firms. Firm one has MAC 1 =4000-200X 1 and Firm two has
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Suppose that there are two firms. Firm one has MAC1=4000-200X1 and Firm two has MAC2=2000-100X2.
a. Calculate the total abatement costs (for each firm and overall) if each firm is required, through a standard, to reduce their pollution to 8.5 units from their unregulated levels.
b. Suppose that the optimal level of pollution is 19 units. How should this be distributed between firms in order to achieve this target at least cost? Calculate the total abatement costs (for each firm and overall) from this distribution of pollution. Compare to your answer for (a).
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