5. Suppose that two power plants, company 1 and 2 release sulfur dioxide (SO2) in a small urban community that exceeds the emissions standard. To meet the standard, 30 units of SO2 must be abated in total. The two firms face the following abatement costs:
MAC1=16+0.5A1
MAC2=10+2.5A2 where costs are measured in thousands of dollars.
a. Prove that a uniform standard will not meet the cost effectiveness criterion.
b. Determine how the abatement levels should be reallocated across the two firms to minimize costs.