Two firms can reduce emissions of an air pollutant at the
following marginal costs:
MAC1 = 500q1 MAC2 = 300q2 (1)
where q1 and q2 are, respectively, the amount of emissions
reduced by the first and second firm. Total abatement cost
functions for the two firms are, respectively:
TAC1 = 1000 + 250(q1)^2 TAC2 = 1000 + 150(q^2) (2)
Assume that with no control at all, each firm would be emitting
40 units of emissions (for aggregate emissions of 80...