Suppose there are two firms in the world, A and B, with marginal costs of abatement given by: MCA=3+XAMCB=3 Each firm is emitting 6 tons of pollution initially, so XAmax=6 and XBmax=6. a) What is the function for the marginal cost of abatement for both firms combined (Note: it will not be a straight line, using a table may be helpful)? What is Xmax for the combined function? b) Suppose marginal benefits depend only on combined abatement X (for example, consider CO2 emissions) and are given by MB=13X. What is X ? c) Solve for the efficient level of XA and XB that produce the X you solved for above. d) How much more does it cost (measured in terms of total cost of abatement) if we reach X by using an "equal reductions" direct regulation, requiring that XA=XB=X/2, instead of using your solution to part (c) above. e) Explain in a sentence or two why a pollution tax will automatically satisfy the equimarginal principle and avoid the extra costs of direct regulation you solved for in part (d). Suppose there are two firms in the world, A and B, with marginal costs of abatement given by: MCA=3+XAMCB=3 Each firm is emitting 6 tons of pollution initially, so XAmax=6 and XBmax=6. a) What is the function for the marginal cost of abatement for both firms combined (Note: it will not be a straight line, using a table may be helpful)? What is Xmax for the combined function? b) Suppose marginal benefits depend only on combined abatement X (for example, consider CO2 emissions) and are given by MB=13X. What is X ? c) Solve for the efficient level of XA and XB that produce the X you solved for above. d) How much more does it cost (measured in terms of total cost of abatement) if we reach X by using an "equal reductions" direct regulation, requiring that XA=XB=X/2, instead of using your solution to part (c) above. e) Explain in a sentence or two why a pollution tax will automatically satisfy the equimarginal principle and avoid the extra costs of direct regulation you solved for in part (d)