The diagram below shows the marginal costs of pollution abatement for two firms,Firm 1 and Firm 2.
FIGURE 17- 5
-A paper mill discharges chemicals into a river which washes the shores of a downstream resort area.The private marginal cost,social marginal cost,and marginal benefit associated with the production of paper are given by the following equations: MCP = 5 + Q,MCS = 10 + 2Q,and MB = 35 - 0.5Q.The allocatively efficient level of output is _ units.

Question

The diagram below shows the marginal costs of pollution abatement for two firms,Firm 1 and Firm 2.
  FIGURE 17- 5
-A paper mill discharges chemicals into a river which washes the shores of a downstream resort area.The private marginal cost,social marginal cost,and marginal benefit associated with the production of paper are given by the following equations: MCP = 5 + Q,MCS = 10 + 2Q,and MB = 35 - 0.5Q.The allocatively efficient level of output is _ units.

Quizplus · Accepted Answer

To find the allocatively efficient level of output, we need to equate the social marginal cost (MCS) with the marginal benefit (MB). 
10 + 2Q = 35 - 0.5Q 
2.5Q = 25 
Q = 10

Therefore, the allocatively efficient level of output is 10 units.

The Diagram Below Shows the Marginal Costs of Pollution Abatement