Problem
The marginal control cost curves for two air pollutant sources affecting a single receptor are MC1 = $0.3q1 and MC2 = $0.5q2, where q1 and q2 are controlled emissions. Their respective transfer coefficients are a1 = 1.5 and a2 = 1.0. With no control they would emit 20 units of emission apiece. The ambient standard is 12 ppm.
a. If an ambient permit system were established, how many permits would be issued and what price would prevail?
b. How much would each source spend on permits if they were auctioned off? How much would each source ultimately spend on permits if each source were initially given, free of charge, half of the permits?
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.