Suppose i have two firms in a region, and each has a different marginal abatement cost function: mac1 = 2000 - 40e1, mac2 = 2000 - 60e2, where maci and ei respectively stand for the marginal abatement cost and the total emissions for firm i. marginal damages (MD) are given by MD = 16E where E is the total emissions in the region.

b) Now, suppose I want to induce the efficient level of emissions using transferable emissions permits. Suppose further that it has been decided that permits should be issued equally to each firm initially. Find the equilibrium permit price, the quantities bought or sold by each firm, and the net cost of the policy to each firm (abatement cost and permit costs/ revenues).