Total Cost (in thousands of dollars) Total Benefits (in thousands of dollars) 16 million gallons Current situation Current situation 12 million gallons 50 800 8 million gallons 150 1300 4 million gallons 500 1650 O gallons 1200 1900
Suppose a city releases 16 million gallons of raw sewage into a nearby lake. Table shows the total costs of cleaning up the sewage to different levels, together with the total benefits of doing so. (Benefits include environmental, recreational, health, and industrial benefits.). a. Using the information in Table, calculate the marginal costs and marginal benefits of reducing sewage emissions for this city. See Production, Costs and Industry Structure if you need a refresher on how to calculate marginal costs.
b. What is the optimal level of sewage for this city?
c. Why not just pass a law that firms can emit zero sewage? After all, the total benefits of zero emissions exceed the total costs.
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