Question: 2.(60) Suppose that there are only two polluters in a society. If left uncontrolled, polluter 1 emits 85 units (e = 85), and polluter

2.(60) Suppose that there are only two polluters in a society. If

2.(60) Suppose that there are only two polluters in a society. If left uncontrolled, polluter 1 emits 85 units (e = 85), and polluter 2 emits 15 units (e = 15). The polluters' marginal abatement costs are MAC = 0.25a1 and MAC2 = 2a2. (Summing the two polluters' individual marginal abatement costs yields aggregate marginal abatement costs of: MACagg = 0.222aT.) The damage caused by the polluters' emissions is MD = 5 + er, where et = ei + e2. a. Using a graph and calculations, find the efficient level of total emissions and the corresponding efficient level of total abatement. b. Considering all relevant costs, what is the total cost to society of the efficient emissions and abatement levels you calculated in part a? Calculate this cost and shade in the area(s) representing it on your graph from part a. c. Suppose that economists re-value the damages to society caused by emissions of this pollutant. Economists now believe that MD = -5 + er. How would the new efficient levels of total abatement and total emissions compare to those you calculated in part a? d. If policy makers adopt a from part a as their abatement target, what is the cost- effective allocation of responsibility for achievement of this target among the two individual polluters?

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