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Examine the following marginal costs and marginal benefits associated with air cleanliness in a given locale:

Quantity of clean air %

Marginal cost $

Marginal benefit $

0

50,000

600,000

20

150,000

360,000

40

200,000

200,000

60

300,000

150,000

80

400,000

120,000

100

infinite

0

a. How do we determine the optimal quantity of clean air?

b. What is the optimal degree of air cleanliness for this example?

c. What is the optimal degree of air pollution for this example?

d. Suppose that a state provides subsidies for a company to build i. plants that contribute to air pollution. Cleaning up this pollution causes the marginal cost of air cleanliness to rise by $210,000 at each degree of air cleanliness. What is the optimal degree of air cleanliness after this change?

e. Why would we not just want the per cent of pollution to be zero?

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Nusrat Fatima
Nusrat FatimaLv10
28 Sep 2019

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