Environmental Economics 6th Edition by Martha k Field,Barry Field

Exercise 1

Suppose that the following discrete numbers show the integer values of MWTP and MC as depicted in Figure 4.1. Determine the socially efficient rate of output. Show that at any other output level, the net benefits to society will be lower than they are at the efficient level. (The MWTP and MC numbers have to be interpreted with care. Thus, e.g., the marginal cost of increasing output from 4 to 5 units is $9, which is also the amount by which cost decreases in going from 5 to 4.)