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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?

Short Answer

Expert verified

(a) The optimal degree of water cleanliness is 60%.

(b) This precise proportion for impurity40%.

(c) Ever since this shift, the liquid is at finest $50,000

Step by step solution

01

Introduction

Like same rings true in break - even point: unless they increase output, whose percentage figure is anticipated to boost.. At summary, a premium hikes better than the normal ratio, or the two have one real association.

Potential Earnings are now the added features a firm gets in boosting the quantities of both a single sector. Minority Revenue would be another label for this in the business field.

02

Explanation (a)

(a) Understanding because overall product equaled marginal revenue however at threshold, a best so extent of cleansing of aquifers improves. 60%. It's also good to clean groundwater toward the degree when objective is to minimize marginal costs. Their margin of return are included in the table underneath.

These statistic shows that information brand provides average income 60%, once amount all collecting duct becomes. As a conclusion, 60percent safe water is just the appropriate volume.

03

Explanation (b)

(b) That maximal amount of moisture destruction becomes40%, and thus the highest limit of water sources was indeed60%. A maximum pollutants amount is computed far below maximum cleanness degree.

Its appropriate dosage on water quality generally considered than that where the unit benefit is far less than the producer surplus.

04

Explanation (c)

(c) If a potential profit reduces by $40,000, an optimum depth of water quality is 40%. Freshwater rusting grows far above boundary stratum until,40%, with maybe a modest bump which is around the concentration . $90,000around a certain level of intensity. Slight decrease as in limited benefit by $40,000lowers a maximum quantity for contamination of water.

Whenever optimum profit exceeds break - even point, an optimum amount of waterborne diseases be established. A optimum amount for contamination being 40%is if net value is $50,000($90,000-$40,000). However at stage, optimal value matches break - even point.

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Most popular questions from this chapter

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?

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