3. (8 marks) Consider a rm with a marginal savings curve M81, as given below. ms1 =_-1 eMM em ssions a. Suppose that under a standards regulation, the rm is required it to reduce its emissions level by eMAX'e1. Illustrate the area that represents the rm's costs of abatement. b. Suppose instead, the industry is regulated under a cap-and-trade system and the rm is given e1 units of permits and the market price of permits is Po. i. Would the rm buy permits or sell permits or use exactly e1 amount of permits ? Explain the rm's decision carellly. ii. Does the rm achieve cost savings compared to (a)? Illustrate your answer in the diagram above