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Chapter 31: 31. Environmental Economics (page 692)

Consider the diagram below, which displays the marginal cost and marginal benefit of water pollution abatement in a particular city, and answer the following questions.

a. What is the optimal percentage degree of water cleanliness?

b. When the optimal percentage degree of water cleanliness has been attained, what cost will be incurred for the last unit of water cleanup?

Short Answer

Expert verified

As a result of a and b, we conclude the optimal percentage

Step by step solution

01

Envirornment economics- Introduction

(a) When marginal gain equals marginal cost, the ideal degree of water contamination is estimated. The figure below depicts the marginal cost and marginal benefit of reducing water pollution in a specific city.

At the level where 65 percent of water is cleansed, marginal revenue matches marginal cost, as seen in the graph above. As a result, the ideal percentage of pure water is 65 percent.

02

Environment economics

b. As a result of additional benefits, the marginal benefit shifts. The effect of increased marginal benefit and lower marginal cost is depicted in the graph below.

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Most popular questions from this chapter

Suppose that a new chief of the government agency discussed in Problem 31-7decides to reduce the number of pollution allowances that firms are permitted to own. Evaluate the effects this policy change will have on the market price of pollution allowances, and discuss whether the policy appears to be fully consistent with the original intent of creating the market for these allowances.

The market price of insecticide is initially \(10 per unit. To address a negative externality in this market, the government decides to charge producers of insecticide for the privilege of polluting during the production process. A fee that fully takes into account the social costs of pollution is determined, and once it is put into effect, the market supply curve for insecticide shifts upward by \)4 per unit. The market price of insecticide also increases, to $12per unit. What fee is the government charging insecticide manufacturers?

The market price of insecticide is initially \(10 per unit. To address a negative externality in this market, the government decides to charge producers of insecticide for the privilege of polluting during the production process. A fee that fully takes into account the social costs of pollution is determined, and once it is put into effect, the market supply curve for insecticide shifts upward by \)4 per unit. The market price of insecticide also increases, to $12 per unit. What fee is the government charging insecticide manufacturers?

Should policymakers impose additional costly anti-plastics pollution requirements if the marginal benefit of pollution abatement currently equals the marginal cost? Explain.

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

a. What is the optimal degree of water cleanliness?

b. What is the optimal degree of water pollution?

c. Suppose that a company creates a food additive that offsets most of the harmful effects of drinking polluted water. As a result, the marginal benefit of water cleanliness declines by $40,000at each degree of water cleanliness at or less than 80 percent. What is the optimal degree of water cleanliness after this change?
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