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= = Suppose that two firms emit a certain pollutant. The marginal cost of reducing pollution for each firm is as follows: MC, 300e,
= = Suppose that two firms emit a certain pollutant. The marginal cost of reducing pollution for each firm is as follows: MC, 300e, and MC2 100e, where e and e are the amounts (in tons) of emissions reduced by the first and second firms, respectively. Assume that in the absence of government intervention, Firm 1 generates 100 units of emissions and Firm 2 generates 80 units of emissions. Suppose regulators decide to reduce total pollution by 40 units. In order to be cost effective, how many units of emissions should the first firm generate? In order to be cost effective, how many units of emissions should the second firm generate?
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