Two firms face the abatement costs

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Reference no: EM13852528

Assume that two power plants, Firm 1 and Firm 2, release arsenic in a small urban community that exceeds the emissions standard. To meet the standard, 40 units of SO2 must be abated in total. The two firms face the following abatement costs:

MAC1 = 18 + 0.7A1 MAC2 = 15 + 3.2A2,

where costs are measured in thousands of dollars.

a) Prove that a uniform standard will not meet the cost-effectiveness criterion.

b) Determine the abatements for company 1 and 2 under the cost effective criterion.

c) Determine Total abatement cost for both companies under cost effective criterion

d) Are there any cost savings on implementing the cost effective criterion with respect to uniform standards, if so please show the savings

Reference no: EM13852528

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