Consider an abstraction of the Santiago, Chile air pollution problem. Assume all pollution damage is in downtown Santiago and is equal to $p^2/2$ where $p$ is the pollution concentration in parts per million (ppm). Pollution comes from automobile emissions and a steel mill on the east side of town. Each unit of automobile emissions results in 2 units of pollution in downtown Santiago. Each unit of steel mill pollution results in one unit of pollution in downtown Santiago. Uncontrolled, there are 10 units of automobile emissions and 4 units of steel mill emissions. The cost of reducing emissions by $q$ units is $q^2$ for the automobiles and also $q^2$ for the steel mill.

a. What are the transfer coefficients for the automobiles and for the steel mill?

b. What is the total control cost in terms of emissions for each source?

c. What is the total control cost per unit of pollution (not emissions) contributed by each source?

d. What is the marginal damage from pollution, in dollars per unit of pollution $\left(\$/ppm\right)$ ?

e. What is the marginal damage in dollars per unit of emissions from each of the two sources?

f. What are the efficiency conditions for the optimal amount of pollution?

g. What efficient level of emissions would come from each of the two sources?