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Question: 4 production of a good in an industry leads to...

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4. Production of a good in an industry leads to pollution/emissions as a by-product of the production process. Let E be the level of emissions. The marginal damages function is MD(E)5 + E. There are two firms in the industry. Firm 1 can reduce emissions according to the Marginal Abatement Cost function MAC1(E1) 20 - 2E1. Firm 2 has Marginal Abatement Cost function MAG(E-30-3E2. (a) Find the Marginal Abatement Costs for the industry. (b) Determine the socially optimal level of emissions for the industry. (c) Determine the Total Damages and Total Abatement Costs for each firm for your answer from (b)

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