Firms A and B each produce 80 units of pollution. The federal government wants to reduce pollution levels. The marginal costs associated with pollution reduction areMACA= 2903eAfor firm A andMACB= 5006eBfor firm B, whereeAandeBare the quantities of pollution produced by each firm. Society's marginal cost from pollution is given byMCP= 140 + 3e, whereeis total pollution.

(a) What is the socially optimal level of pollution from each firm?

(b) How much total pollution is there in the social optimum?

(c) If each firm is permitted to emit half of the optimum level of pollution, would this lead to an efficient outcome? Explain why or why not.

(d) Propose a policy that yields the efficient outcome if the regulator cannot tell which firm is A and which firm is B.