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Solve clearly Consider two firms with the following marginal abatement costs (MAC) functions: MACl = 10 - E1 MAC2 = 16 2E2 Assume that the

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Consider two firms with the following marginal abatement costs (MAC) functions: MACl = 10 - E1 MAC2 = 16 2E2 Assume that the marginal external damages (MED) from the aggregate emissions of both firms (EA = E1+E2) is: MED = 2EA To achieve the socially efficient level of aggregate emissions (EA*) using a per-unit subsidy on abatement, the government should set the subsidy equal to S

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