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2. LA has the worst urban air quality across all major metropolitan areas in the USA. Automobile emissions contribute significantly to this problem. Assume the
2. LA has the worst urban air quality across all major metropolitan areas in the USA. Automobile emissions contribute significantly to this problem. Assume the California Air Resources Board is considering whether to set a uniform emission standard or a regionally based emission standard, where one standard is set for LA and another for the rest of California. Marginal social benefits (MSB) and marginal social costs (MSC) for the two regions have been estimated as follows: MSBabatement in LA = 500 - 0.75A MSB abatement in the rest of California = 150 - 0.25A MSBabatement in all of California = 0.5A Where A is the level of abatement of automobile emissions, and MSB and MSC are in millions of dollars. a) Graph the MSB and MSC functions on the same diagram. Show the regionally based set of standards (ALA and ARemainder) that should be recommended to achieve allocationefficiency in each region. Find the numerical value of each standard
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