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Question
Abatement with 2 firms. The firms Hooli and Aviato each produce 250 of pollution. Here are the firms' marginal abatement costs:
MACHooli = 4*A
MACAviato = 1*A
We would like to reduce total pollution by 300.
1. What would be the total cost to the firms of having each of them cut back their pollution by 150?
2. What's the efficient level of abatement for Aviato?
3. What would be the DWL from having each firm abate 150, rather than having them each abate the efficient amount?
4. What emissions tax would get us the efficient level of abatement from both firms?
5. What would be the total cost to the firms of reaching the efficient level of abatement?
6. What would be the total revenue from this tax?
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