Suppose that as a policy maker you are concerned about reducing emissions of greenhouse gases that lead to climate change. Suppose there are two firms whose marginal abatements costs are as follows: MAC1=18Q1, MAC2=6Q2 where Q1 is the amount of emissions reduction by firm 1 and Q2 is the amount of emissions reduction by firm 2.

i). Draw the two marginal abatement cost curves in a single diagram.

ii) If both firms reduce the total amount of emissions by 20 units, calculate the quantities by which each firm will reduce emissions.

iii) Calculate the total abatement cost if the two firms are undertaking emissions reduction efficiently.

iiii) What is the level of tax that would be required to achieve the efficient level of emissions reduction?