Derive the optimal emissions for each firm

Reference no: EM132139557

Question: There are two firms with the following marginal abatement curves: MAC₁(E₁)=50-E₁/4; MAC₂(E₂)=75-E₂/2. Marginal damages as a function of total emissions is MD(E_T)=E_T/3.

(a) Derive the aggregate MAC curve as a function of E_T and graph.

(b) Solve for the efficient level of emissions.

(d) Determine the emissions tax that would support this outcome.

(d) Explain how a tradable permit scheme would work to support this outcome, including the permit price after trading.

Reference no: EM132139557

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