Find the optimal level of pollution as recommended

Assignment Help Econometrics

Reference no: EM13203200

The cost of pollution (in billions of dollars) originating in the paper industry is
Cp = 2P + P^2
where P is the quantity of pollutants emitted (in thousands of tons). The cost of pollution control (in billions of dollars) for this industry is
Cc = 5 - 3P

A) What is the optimal level of pollution?

P = 2P + P^2 => MC = 2 + 2P
CC = 5 - 3P => MC = -3

to find the optimal level of pollution as recommended, we need to set total marginal cost = 0, then I have
2 + 2P -3 = 0 => 2P -1 = 0 => P = 0.5
You have already evaluated MCP = 2 + 2P and MCC = -3

B) At this level of pollution, what is the marginal cost of pollution?
Part b. now requires you to evaluate MCP when P = 0.5

C) At this level of pollution, what is the marginal cost of pollution control?
Part c. requires you to evaluate MCC when P = 0.5

Reference no: EM13203200

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