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Suppose that there are two sources of a uniformly mixed pollutant. Source 1 has total abatement costs (C) as a function of its abatement ( A ) given by C(4)=104, +0.754. Similarly for source 2, C,(A,) = 204, +0.54. Total abatement ( A ) is the sum of the abatement amounts of the two sources ( A = 4 + A,), and the total benefits (B) of abatement are equal to B(A)=136A-0.24. Abatement is measured in tons per year, costs and benefits are in dollars per year. Abatement is zero initially, with emissions of 200 tons from each source. Answer the following questions, showing your work and explaining your reasoning. a. Find the cost effective allocation of 200 tons of total abatement. Plant 1 abatement (A1) = Plant 2 abatement (A2) = b. Consider a cap-and-trade system in which each allowance (or permit) grants a source the right to emit one ton. The regulator issues 100 allowances to each source. Which of the following is true, and why? i. Source 1 sells allowances to source 2. ii. Source 2 sells allowances to source 1. ii. The sources do not buy or sell allowances. C. In the cap-and-trade system of part b, how many allowances are bought and sold? Why? d. In the cap-and-trade system of part b, what would be the competitive equilibrium price for allowances? Why? e. Is an abatement target of 200 tons more or less than the efficient amount of abatement? How do you know? f. What per-ton emissions charge would provide the incentive for efficient abatement? Explain your reasoning and show any work. 8 How much would each source abate when facing the emissions charge in part ? Again explain your reasoning and show any work. Suppose that there are two sources of a uniformly mixed pollutant. Source 1 has total abatement costs (C) as a function of its abatement ( A ) given by C(4)=104, +0.754. Similarly for source 2, C,(A,) = 204, +0.54. Total abatement ( A ) is the sum of the abatement amounts of the two sources ( A = 4 + A,), and the total benefits (B) of abatement are equal to B(A)=136A-0.24. Abatement is measured in tons per year, costs and benefits are in dollars per year. Abatement is zero initially, with emissions of 200 tons from each source. Answer the following questions, showing your work and explaining your reasoning. a. Find the cost effective allocation of 200 tons of total abatement. Plant 1 abatement (A1) = Plant 2 abatement (A2) = b. Consider a cap-and-trade system in which each allowance (or permit) grants a source the right to emit one ton. The regulator issues 100 allowances to each source. Which of the following is true, and why? i. Source 1 sells allowances to source 2. ii. Source 2 sells allowances to source 1. ii. The sources do not buy or sell allowances. C. In the cap-and-trade system of part b, how many allowances are bought and sold? Why? d. In the cap-and-trade system of part b, what would be the competitive equilibrium price for allowances? Why? e. Is an abatement target of 200 tons more or less than the efficient amount of abatement? How do you know? f. What per-ton emissions charge would provide the incentive for efficient abatement? Explain your reasoning and show any work. 8 How much would each source abate when facing the emissions charge in part ? Again explain your reasoning and show any work