Question

Consider the diagram below and respond to the questions that follow.

a. Assume that a new technique for decreasing water pollution lowers the marginal cost of pollution reduction at every level of water cleanliness. Will the ideal % degree of water cleanliness rise or decline after this event? Will the cost of the final unit of water cleanup grow or decrease? Include a visual to help you explain your point.

b. Assume that the event described in item (a) occurs, and that medical studies show that the marginal benefit from reducing water pollution is higher at all levels of water purity. Will the ideal % degree of water cleanliness rise or decrease after both events? Can you predict whether the cost of the last unit of water cleanup will increase or decrease as compared to the initial optimum? To help you clarify your answers, create a new diagram.

Short answer

After the event occurs the degree of water cleanliness fall and increases in the unit of water.

Step-by-step solution

introduction

The marginal cost of pollution abatement will be reduced as new technology is installed.

a.

The graph below shows how a decrease in marginal cost raises the degree of cleanliness while lowering the cost of the previous cleanup:

Graph$1.1$

As seen in the graph $1.1$, a decrease in the marginal cost resulted in an increase in the degree of cleanliness (as represented by $Q$and$Q*$ ) and a decrease in the cost of the last clean up (indicated by $C$and$C*$ ).

 the effect of increased marginal benefit and decreased marginal cost

b.Because of the higher benefits, the marginal benefit shifts. The effect of increased marginal benefit and lower marginal cost is illustrated in the graph below:

Graph$1.2$

Because of the enhanced benefit and lower cost, the level of cleanliness will improve. The cost of pollution reduction could rise or fall.