15. Two firms are ordered by the federal government to reduce their pollution levels. Firm A’s marginal costs associated with pollution reduction is MC

20  4Q. Firm B’s marginal costs associated with pollution reduction is MC
10  8Q. The marginal benefit of pollution reduction is MB
400 

4Q.

a. What is the socially optimal level of each firm’s pollution reduction?

b. Compare the social efficiency of three possible outcomes: (1) require all firms to reduce pollution by the same amount; (2) charge a common tax per unit of pollution; or (3) require all firms to reduce pollution by the same amount, but allow pollution permits to be bought and sold.