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
Why would it not be optimal for this farmer to abate four units of pollution?
A) because it is not productively efficient
B) because the total net benefit of abating the 4th unit is greater than the total cost
C) because the farmer has no way to charge a price for the units of pollution abated
D) because the total cost of abating 4 units is greater than the total benefits
E) because abating the 4th unit adds more to social costs than to social benefits
Correct Answer:
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