Answer Happy

Suppose the marginal control costs (MC) and the total costs (TC)
of reducing emissions for two steel producers are: Producer 1: MC1
= 7.5Q1 TC1 = 5(Q1)2 Producer 2: MC2 = 15Q2 TC2 = 10(Q2)2 Where MC1
and MC2 are the marginal control costs and Q1 and Q2 are the
volumes of emissions reduced by Producers 1 and 2 respectively.
With no controls at all, each firm emits 50 units totalling 100
units.
a. Suppose the government allocates emissions reductions equally
among the two producers to reduce total emission by 40% (that is
each firm has to reduce emissions by 20 units). Calculate the total
cost to each firm (Hint: use the total cost function TC). (2
points)
b. Calculate the cost-effective allocation of control
responsibility if a total reduction of 60 emission units is
required. What is the total control cost and how does this compare
to part a? (4 points)
c. If the government wants to charge an emission tax, what per
unit tax should they impose? (2 points)
d. How much total revenue would the Government collect from the
emission tax in part b (2 points)