Question
exercise: Two producers in a market producing widgets have different marginal abatement costs: MAC1=2A1 MAC2=3A2 Where A is units of abatement, NOT EMISSIONS, in tons
exercise:
Two producers in a market producing widgets have different marginal abatement costs: MAC1=2A1
MAC2=3A2
Where A is units of abatement, NOT EMISSIONS, in tons per year, and P is price in $/ton. The demand/marginal benefit for abatement is as follows: MAB=22-A
Question:
What is the aggregate MAC function for the Widget market (at a given price, how much will be abated?)
Possible answer: I know that to get the aggregate MAC function I should sum up horizontally.. so I clear the equation for each producer .. and I get 5/6 as a result of A. Then if I set the price $10 ... how can I calculate the abatement cost? 5/6 times 2 for the MAC1 and time 3 for the MAC2?
Am I correct???
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