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Suppose a Farm That Is Polluting an Underground Water Supply

Question 60

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
Why would it not be optimal for this farmer to abate four units of pollution?


A) because abating the 4th unit adds more to social costs than to social benefits
B) because the total net benefit of abating the 4th unit is greater than the total cost
C) because the total cost of abating 4 units is greater than the total benefits
D) because it is not productively efficient
E) because the farmer has no way to charge a price for the units of pollution abated

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