The two dry-cleaning companies in College town, College Cleaners and Big Green Cleaners, are a major source of air pollution. Together they currently produce 350 units of air pollution, which the town wants to reduce to 200 units. The accompanying table shows the current pollution level produced by each company and each company's marginal cost of reducing its pollution. The marginal cost is constant.

a. Suppose that Collegetown passes an environmental standards law that limits each company to 100 units of pollution. What would be the total cost to the two companies of each reducing its pollution emissions to 100 units? Suppose instead that College town issues 100 pollution vouchers to each company, each entitling the company to one unit of pollution, and that these vouchers can be traded.
b. How much is each pollution voucher worth to College Cleaners? To Big Green Cleaners? (That is, how much would each company, at most, be willing to pay for one more voucher?)
c. Who will sell vouchers and who will buy them? How many vouchers will be traded?
d. What is the total cost to the two companies of the pollution controls under this voucher system?

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Marginal cost of reducing pollution Initial pollution I (units) 230 120 (per unit) Companies College Cleaners Big Green Cleaners $5 $2