Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E): MAC 1= 18-2E 1 MAC 2 = 12-E2, 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 efcient level of aggregate emissions (EAgg, the government institutes a perunit subsidy to abatement. The total (or combined) subsidy payment to the two firms is $_

Economics (MindTap Course List)
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ISBN:9781337617383
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Chapter30: Market Failure: Externalities, Public Goods, And Asymmetric Information
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Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E):
MAC_1 = 18-2E_1
MAC 2 = 12-E2,
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 perunit subsidy
to abatement. The total (or combined) subsidy payment to the two firms is $_
Transcribed Image Text:Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E): MAC_1 = 18-2E_1 MAC 2 = 12-E2, 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 perunit subsidy to abatement. The total (or combined) subsidy payment to the two firms is $_
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