Problem 3 = In this exercise we consider a cap-and-trade system that covers two firms. The two emitters, called A and B, are modeled by their marginal abatement costs functions: MAC(e) = 100 -e and MAC(e) 200 - 2e. For simplicity, it is assumed that oe 100 for both emitters. Under the cap-and-trade program, each plant is awarded 75 permits, counting one unit each. That is, if a firm wishes to emit more (i.e. e>75), it will need to purchase additional allowances from the other firm. Question 3.1 Create a diagram that illustrates the two marginal abatement cost functions. HINT: Have emissions, e, on the first axis (the "x-axis"). Use this diagram to explain why any trade between the two would involve A selling permits to B. Question 3.2 How many permits would A be willing to sell at the following price points: 25, 30, 35, 40, 45, 50? Question 3.3 How many permits would B be willing to buy at the following price points: 25, 30, 35, 40, 45, 50? Question 3.4 Illustrate the supply and demand curves in a diagram. Question 3.5 Find the equilibrium price.