Problem
Suppose that two major dischargers (Firm 1 and Firm 2) of phosphorus face the following marginal abatement cost
(MAC) functions: MAC1 ¼ 3 þ 0:75A1 MAC2 ¼ 2 þ 0:5A2
where A is units of phosphorus, and MAC is in millions of dollars.
Now, consider a government initiative to limit phosphorus emissions by establishing a marginal effluent fee (MEF) of $12 per unit of phosphorus.
a. Given this MEF, determine the abatement level for each firm.
b. Is this a cost-effective solution? Why or why not?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.