calculations. Application 3 Two plants are emitting a uniformly mixed pollutant called gunk into the beautiful sky over Tourist-Town. The city government decides that it can tolerate total emissions of no more than 100 kgs of gunk per day. Plant G has marginal reduction costs of 80-4x, and is currently polluting at a level of 20, while plant K has marginal reduction costs of 100-y, and currently pollutes at a level of 100 (x and y are the level of emissions at each plant). 1) What is the cost-effective pollution level for each plant if total pollution must equal 100 (3 pts)? Suppose the city government knows marginal reduction costs at the two plants. In this case could the city obtain cost-effective pollution reduction using a Command and Control (CAC) approach; if so, how (2 pts)? 2) Now assume that the city is having a hard time getting this information. So what are the two "Incentive-Based" policies that could be used to get a cost-effective reduction of pollution to 100 units, without knowing the MC of the two firms? (3 pts) Discuss two advantages each method has over the other (2 pts). 3) Suppose the authorities are considering a tradable emission permit system in which they give half the permits to each firm, or a tax system. If both systems work perfectly, how much will the firms (Plant G & K) have to pay, in total, for pollution reduction under the two schemes (4+4=8 pts; note: you may draw graphs for your own calculation but you don't have to submit it)? Could this explain why Tourist-Town would be more likely to adopt a permit system over the tax system or vice versa (2 pts ) ? 2 DEC 30 8 itv 20 F3