Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E): MAC_1 = 18-2E_1 MAC_2 12- E_2, and assume marginal external damages (MED) from the aggregate emissions of both firms (E_Agg = E_1 + E_2) is: MED= .5E_Agg. To achieve the socially efficient level of aggregate emissions (E*_Agg), the government institutes a per unit subsidy to abatement equal to $ Answer:
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Q 2
![Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E):
MAC_1 = 18-2E_1
MAC_2 = 12- E_2,
and assume marginal external damages (MED) from the aggregate emissions of both firms (E_Agg = E_1 + E_2) is:
MED= .5E_Agg.
To achieve the socially efficient level of aggregate emissions (E*_Agg), the government institutes a per unit subsidy to
abatement equal to $_
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