Suppose the industry is currently unregulated and there are only 2 power plants in the industry.
The 2 power plants are currently emitting 8,000 tons of pollution each (for a total of 16,000 tons).
Pollution reduction costs for Plant 1: $MCR_1 = 0.02 Q_1$
Pollution reduction costs for Plant 2: $MCR_2 = 0.03 Q_2$
(The diagram is here to help you with the math, but it's not drawn to scale)
Pollution Reduction Costs per Unit
$
MCR2
MCR1
C
E
B
A
D
Firm 1
Firm 2
Units of Pollution Reduced
Figure 8.3