A Blue Ribbon Committee has decided that acid rain should be reduced and is trying to determine the optimal level of reduction.There are benefits from reducing acid rain (more wildlife and forests,better health,etc.),but there are also costs.The committee estimates that the marginal benefit of each unit of reduction is $700 - 5R,where R is units of reduction,and the marginal cost is 2R.If the committee wants to maximize the net benefit from reducing acid rain,what is the optimal level of pollution reduction?

Question

Quizplus · Accepted Answer

To find the optimal level of pollution reduction, we need to find the level of reduction where the marginal benefit equals the marginal cost. 
MB = $700 F1F1F1S1F1F1F10 5R 
MC = 2R

Setting them equal and solving for R: 
$700 F1F1F1S1F1F1F10 5R = 2R 
$700 F1F1F1S1F1F1F10 5R = 2R 
$700 F1F1F1S1F1F1F10 5R = 2R 
R = 100

Therefore, the optimal level of pollution reduction is 100 units.

A Blue Ribbon Committee Has Decided That Acid Rain Should