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Suppose a city releases 16 million gallons of raw sewage into a nearby lake. The table below shows the total costs of cleaning up the sewage to different levels, together with the total benefits of doing so. (Benefits include environmental, recreational, health, and industrial benefits.) Using the information in the table, calculate the marginal costs and marginal benefits of reducing sewage emissions for this city. What is the optimal level of sewage for this city?
Total Cost
(in thousands of dollars)Total Benefits
(in thousands of dollars)16 million gallonsCurrent situationCurrent situation12 million gallons508008 million gallons15013004 million gallons50018500 gallons12002000
a.4 million gallons
b.8 million gallons
c.12 million gallons
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