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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

The following table gives hypothetical annual total costs and total benefits of maintaining alternative populations of Asian elephants.

a. Calculate the marginal costs and benefits, and draw marginal benefit and cost schedules.

b. Given the data, what is the socially optimal world population of Asian elephants?

c. Suppose that two events occur simultaneously. Technological development allows machines to do more efficiently much of the work that elephants once did, which reduces by \(10million the marginal benefit of maintaining the elephant population for each 7,500increment in the elephant population. In addition, new techniques for breeding, feeding, and protecting elephants reduce the marginal cost by \)40million for each 7,500increment in the elephant population. What is the new socially optimal population of Asian elephants?

Contrast the roles of private and common property rights in problems such as the fates of endangered species

Consider the diagram in Problem 31-4, and answer the following questions.

a. Suppose that a new technology for reducing water pollution generates a reduction in the marginal cost of pollution abatement at every degree of water cleanliness. After this event occurs, will the optimal percentage degree of water cleanliness rise or fall? Will the cost incurred for the last unit of water cleanup increase or decrease? Provide a diagram to assist in your explanation.

b. Suppose that the event discussed in part (a) occurs and that, in addition, medical studies determine that the marginal benefit from water pollution abatement is higher at every degree of water cleanliness. Following both events, will the optimal percentage degree of water cleanliness increase or decrease? In comparison with the initial optimum, can you determine whether the cost incurred for the last unit of water cleanup will increase or decrease? Use a new diagram to assist in explaining your answers.

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?

Suppose that a new chief of the government agency discussed in the problem decides 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.
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