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In this situation there are two independent firms, each emitting 15 units of pollutants into the...

In this situation there are two independent firms, each emitting 15 units of pollutants into the environment for a total of 30 units in their region. The government imposes an abatement standard of 15 units. The polluter’s cost functions are as follows: TAC1 = 5 + 0.75(A1)^2 and MAC1 = 2A1 and TAC2 = 5 + 0.5(A2)^2 and MAC2 = A2, where A is units of abatement undertaken by a firm

a. Suppose that the government mandates each company to abate pollution uniformly, that is 10 units of pollution each. What are the cost implications (TAC and MAC) of this mandate?

b. Assume that the government institutes an emission charge of $16 dollars per unit of pollution. How many units of pollution would each polluter abate? Is the emission charge a cost-effective strategy for meeting the standard?

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