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Suppose a Farm That Is Polluting an Underground Water Supply

Question 51

Multiple Choice

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
What is the socially optimal amount of pollution abatement for this farm?


A) 0 units
B) 1 units
C) 2 units
D) 3 units
E) 4 units

Correct Answer:

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