Week of January 20-27 Practice Problems
Practice Problems for Chapter 3, 4 and 5:
Suppose marginal damages due to industrial chlorine emissions into a river system are defined
by the equation
MD = 2E
where E is the measure of pollution. Marginal abatement costs are defined by the equation
MAC = 1000 - ½E
(i) Calculate the pollution level in the absence of any pollution. If you were a policy maker and
were asked to set a target for emissions reduction, how large a reduction would you guess
ought to be pursued?
(ii) Calculate the optimal level of pollution. How good was your guess?
Now suppose that scientific evidence arises showing that the chlorine release is twice as