18. Suppose a community faces a pollution problem because of emissions from a polluter with MAC=36- 2E. The information on pollution damages is given by MD=E .

(a) If there is a tax rate on emissions of $ 9/unit, then what is the emission level choosen by the polluter in equilibrium? What is the amount of its compliance costs?

(b) What is the socially efficient tax rate in the given situaton?

(c) Now imagine a situation where the polluter bargains with the community ( let's say, with the community government) and offers to pay $6 for each unit of emission ( i.e. $6/unit) it is allowed to produce. What level of emissions is the community likely to allow? What is the likely net gain to the community from allowing those units of emissions?

[ Parts (a), (b) and (c) aren't related to one another]