Consider three firms which are emitting sulfur into the California air. We will call supply the units of pollution control or reduction. Each firm has a cost-of-reduction schedule, and we will say that these schedules are given by the MC curves of firms A, B, and C in Figure 8-12.

a. Interpret the "market" supply or MC schedule for reducing sulfur emissions, shown in the middle of Figure 8-12.

b. Say that the pollution-control authority decides to seek 10 units of pollution control. What is the efficient allocation of pollution control across the three firms?

c. Say that the pollution-control authority decides to have the first two firms produce 5 units each of pollution control. What is the additional cost?

d. Say that the pollution-control authority decides upon a "pollution charge" to reduce pollution to 10 units. Can you identify what the appropriate charge would be using Figure 8-12? Can you say how each firm would respond? Would the pollution reduction be efficient? Explain the importance of marginal cost in the efficient reduction of pollution in this case.