Determine the optimal level of abatement activity

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Reference no: EM13852535

Policy analysts in the Department of Natural Resources have estimated that the marginal benefits from water pollution abatement are given by the function MB ¼ 0.90 À 0.03A, where A is a measure of the abatement intensity. Industry experts have estimated that the marginal cost of abatement activity is MC = 0.30 + 0.09A.

a. Determine the optimal level of abatement activity.

b. Explain what happens when new technology reduces the marginal cost of abatement to MC = 0.25 + 0.06A.

Reference no: EM13852535

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