Question: Help with #5 a-d please pollution tax? 10 points. 5. Suppose there are two firms who can abate their emissions of a pol- lutant; the

Help with #5 a-d please

pollution tax? 10 points. 5. Suppose there are two firms who can abate their emissions of a pol- lutant; the are currently emmitting P = 100 units each, and can carry out abatement A according to the following cost functions MC1 = 10A MC2 = 50A The marginal damage of each unit of pollutions given by MD - 500. (a) Depict this situation graphically. 10 points. (b) What is the efficient amount of abatement for each firm? 5 points (c) What is the correct pigouvian tax to achieve this outcome? What is the correct cap-and-trade cap? (d) Suppose the cap were set at 170 units of pollution; what will the price of a permit be? How can we tell this is inefficient? 5 points

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