Optimal emissions Given:

MAC_T = 1,750-e_t MD_T = 0.75e_T

Find the efficient level of total emissions

There are two firms with abatement cost functions:

MAC₁=1500-e₁

MAC₂ = 2000-2e₂

Find:

• Emissions per firm with no regulation
• MAC and TAC for each firm if the efficient level of emissions is divided in half
• If efficient emissions are divided in half, how much does each abate?
• The allocation of emissions that will minimize total abatement cost across firms

TRYING TO FIGURE OUT THE STEPS TO GET TO THESE ANSWERS:

• ANSWER:
• • Emissions per firm with no regulation (750, 1000)
  • MAC and TAC for each firm if the efficient level of emissions is divided in half ($500 and $62,500 for firm l ) ($1,000 and $250,000 for firm 2)
  • If efficient emissions are divided in half, how much does each abate? (250 and 500)
  • The allocation of emissions that will minimize total abatement cost across firms (375 and 625 respectively)