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Suppose there are two polluters, and they have different marginal abatement cost curves (MAC): MAC1= 25Q1 and MAC2= 10Q2. Q1 and Q2 are the amount

Suppose there are two polluters, and they have different marginal abatement cost curves (MAC): MAC1= 25Q1 and MAC2= 10Q2. Q1 and Q2 are the amount of pollution abated (reduced) by polluter 1 and polluter 2, respectively. Assume that, with no control, each polluter would be emitting 20 units of emissions, with a total emission of 40 units for both polluters. The government wants to reduce the total emissions by 21 units.

  1. What would be cost effective allocation of emission reduction? Show the cost-effective allocation of pollution in graph and upload it
  2. If the government wants to achieve the same by using emission tax, how much should they tax?
  3. How much revenue would the government collect from emission tax?

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