Scenario: Consider two utilities X and Y, which are subject to pollution control regulation.

They try to maximize their own profit.

The price for electricity generation received by each utility is $100/MWh.

Assume that each firm produces 1 MWh of power regardless of regulation.

Each utility separately emits 10.0 lbs of NOx/MWh in the absence of regulation.

The regulator wishes to limit total emissions to 14.0 lbs of NOx/MWh.

In other words, the goal is total abatement of 6.0 lbs of NOx/MWh ( because 10 + 10 - 14 = 6)

Utility X has a total abatement cost ofTAC_x(a_x) = 3a_x² and marginal abatement cost of MAC_x = 6a_x

Utility Y has a total abatement cost of TAC_x(a_x) = 8a_x² and marginal abatement cost of MAC_x = 16a_x

Keep in mind that profit is equal to total revenue minus total cost.

1.)Both firms are under a uniform standard, where they evenly split the total abatement.

For each firm, calculate:

oAbatement (a_x and a_y)

oMAC for the last unit of abatement

oTotal profits