1. Two firms can control emissions at the following marginal costs: MC1 =

$200q1, MC2 = $100q2, where q1 and q2 are, respectively, the amount of emissions reduced by the first and second firms. Assume that with no control at all, each firm would be emitting 20 units of emissions or a total of 40 units for both firms.

a. Compute the cost-effective allocation of control responsibility if a total reduction of 21 units of emissions is necessary.

b. Compute the cost-effective allocation of control responsibility if the ambient standard is 27 ppm, and the transfer coefficients that translate a unit of emissions into a ppm concentration at the receptor are, respectively, a1 = 2.0 and a2 = 1.0.