Question: The aggregate marginal abatement cost (AMAC) function for the industry is AMAC = 200 - 2.5E. Explanation: To find the aggregate marginal abatement cost (AMAC),

The aggregate marginal abatement cost (AMAC) function for the industry is AMAC = 200 - 2.5E. Explanation: To find the aggregate marginal abatement cost (AMAC), we first need to solve the MAC curves for e1 and e2. For Firm 1, we have MAC1 = 100 - 2e1. Solving for e1 gives us e1 = 50 - 0.5MAC1. For Firm 2, we have MAC2 = 100 - 0.5e2. Solving for e2 gives us e2 = 200 - 2MAC2. The aggregate emissions for the industry are denoted as E = e1 + e2. Substituting the expressions for e1 and e2 from above into this equation gives us E = (50 - 0.5MAC1) + (200 - 2MAC2). Assuming that the marginal abatement costs are equal for both firms (i.e., MAC1 = MAC2 = MAC), this simplifies to E = 250 - 2.5MAC. Finally, solving this equation for MAC gives us the aggregate marginal abatement cost (AMAC) function for the industry: AMAC = 200 - 2.5E

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