Suppose two countries with domestic cap-and-trade policies a…

Suppose two countries with domestic cap-and-trade policies are considering linking their two systems. Country A has a cap of 20 tons of emissions, a domestic marginal cost of abatement of $10, and an uncontrolled emissions level of 60 tons, while Country B has a cap of 40 tons, a domestic marginal cost of abatement of $1q, where q = the tons of emission abatement, and an uncontrolled emissions level of 80 tons. If these two markets were linked by allowing each country to buy from and sell allowances to the other, what would be the price for both countries?

Suppose that the marginal damages to society from air pollut…

Suppose that the marginal damages to society from air pollution are MD = e – 25, where e is the level of air pollution. Suppose also that the marginal cost of reducing the air pollution on the part of firms is MC = 200 – 2e.  Find the optimal level of pollution.