Example from class (Thursday March 21, 2019) MAC1 = 1,500 - et Measures the marginal cost of emissions MDT = 0.50eT Measures the marginal damages associated with emissions MAC1 = 1,800 - 2ej Firm 1's marginal cost of emissions MAC2 = 1,200 - 2e2 Firm 2's marginal cost of emissions = Q1: If the firms are unregulated then explain why firm 1 will emit 900 and firm 2 will emit 600 Q2: Demonstrate why the optimal level of total emissions is 1,000. Q3: Identify the area that represents the net benefit of reducing emissions to the optimal level. Q4: If each firm is allowed to emit 500 units, find the marginal abatement cost and total abatement cost for each firm. Q5: Find the cost minimizing level of emissions for each firm. We want the total emissions to equal 1.000 but we do not want to simply divide the total in half. Why? Example from class (Thursday March 21, 2019) MAC1 = 1,500 - et Measures the marginal cost of emissions MDT = 0.50eT Measures the marginal damages associated with emissions MAC1 = 1,800 - 2ej Firm 1's marginal cost of emissions MAC2 = 1,200 - 2e2 Firm 2's marginal cost of emissions = Q1: If the firms are unregulated then explain why firm 1 will emit 900 and firm 2 will emit 600 Q2: Demonstrate why the optimal level of total emissions is 1,000. Q3: Identify the area that represents the net benefit of reducing emissions to the optimal level. Q4: If each firm is allowed to emit 500 units, find the marginal abatement cost and total abatement cost for each firm. Q5: Find the cost minimizing level of emissions for each firm. We want the total emissions to equal 1.000 but we do not want to simply divide the total in half. Why