Suppose a farm that is polluting an underground water supply faces the following marginal costs for abating units of pollution: 1st unit abated,MC = $250 2nd unit abated,MC = $400 3rd unit abated,MC = $650 4th unit abated,MC = $950
The marginal benefit to society from this farm abating units of pollution are as follows: 1st unit abated,MB = $1000
2nd unit abated,MB = $800 3rd unit abated,MB = $650 4th unit abated,MB = $300
If this farm abates 4 units of pollution,what is the net benefit to society of the final unit of pollution abated?

Question

Quizplus · Accepted Answer

To find the net benefit of the final unit of pollution abated, we need to calculate the difference between the marginal cost and marginal benefit of the 4th unit abated. 
MB-MC= $300 - $950 = -$650 
The negative sign indicates that the cost of abating the 4th unit exceeds the benefit to society. Therefore, the best choice is C, which represents a net cost of $650 to society for the final unit of pollution abated.

Suppose a Farm That Is Polluting an Underground Water Supply