Determine abatement levels

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Reference no: EM1370305

5. Suppose that two power plants, company 1 and 2 release sulfur dioxide (SO2) in a small urban community that exceeds the emissions standard. To meet the standard, 30 units of SO2 must be abated in total. The two firms face the following abatement costs:
MAC1=16+0.5A1
MAC2=10+2.5A2 where costs are measured in thousands of dollars.

a. Prove that a uniform standard will not meet the cost effectiveness criterion.
b. Determine how the abatement levels should be reallocated across the two firms to minimize costs.

Reference no: EM1370305

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