1. Suppose a uniform emissions standard is adopted that requires each firm to reduce emissions from the unregulated level to 10 units. Calculate the total abatement costs (TAC) of both firms (TAC₁ + TAC₂) that result from implementing this uniform standard. TAC = ________________________

A non-market valuation study was conducted to estimate the monetary value of damages caused by Schitt emissions according to the marginal damage function:

MD = 4E where E = (E₁+E₂) the aggregate emissions by Firm1 (E₁) and Firm2 (E₂)

Firm1 has marginal abatement cost curve MAC₁ = 80 - 4E₁

Firm2's marginal abatement cost curve for Schitt is MAC₂ = 40 - 2E₂.

Based on the harmful effects of Schitt, the pollution control authority has set a new emissions target of 20 total units (E₁+E₂). It is trying to decide whether to use a performance-based emissions standard or an emissions trading market to achieve the new emissions target.