MAC^A = 16 – E and MAC^B = 16 – E. The firms are being regulated to E^SE as the overall level of emissions produced. MD = 4 + E / 2 Using the… 1

MAC^A = 16 – E and MAC^B = 16 – E. The firms are being regulated to E^SE as the overall level of emissions produced. MD = 4 + E / 2

Using the information provided above. , suppose the two polluters are located in separate regulatory districts but the environments are overlapping with respect to the pollutant (meaning the two polluters share the same environment with respect to that pollutant, or you can think of the pollutant as being an ambient type that spreads across the two districts). The regulators set the mandatory never – exceed emission levels to the socially efficient level, but under the mistaken belief that the polluter in their own district is the only source of the pollutant (clearly the actual damages reflect the ambient nature of the pollutant). What is the resulting, actual TSC in this case, (where TSC measures the costs in the combined districts)?

Please show all graphs and calculations necessary.

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