Marginal cost function for reducing pollution

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Appalachian Coal Mining believes that it can increase labor productivity and, there-fore, net revenue by reducing air pollution in its mines. It estimates that the marginal cost function for reducing pollution by installing additional capital equipment is MC= 40P, where P represents a reduction of one unit of pollution in the mines. It also feels that for every unit of pollution reduction the marginal increase in revenue (MR) is MR= 1,000 −10P. How much pollution reduction should Appalachian Coal Mining undertake?

Reference no: EM13851744

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