Question: Hello, I would like some help to solve this question please. 2. (32 points) Suppose there are two factories. In the course of their operation,

Hello, I would like some help to solve this question please.

Hello, I would like some help to solve this question please. 2.

2. (32 points) Suppose there are two factories. In the course of their operation, they burn fossil fuels releasing greenhouse gases into the atmosphere. The cost of abatement for these two factories is described by MAC1 = 200 - 0.1E, and MAC, = 200 - 0.4E, respectively, where E, for i = 1, 2 is tonnes of CO, emission per month. The damages caused in the atmosphere can be described by MD = 0.12E. (a) Derive the aggregate marginal abatement cost function and find the socially efficient level of emissions. (8 points) (b) Assume that the regulator sets individual emission standards to control pollution. Find the socially efficient standard for each firm and calculate the total compliance cost per firm. (12 points ) (c) Assume that the regulator sets an emission tax to control pollution. Find the level of the emission tax that is consistent with the socially efficient equilibrium and calculate the total compliance cost per firm. (12 points)

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