Pollution reduction should appalachian coal mining undertake

Reference no: EM1318032

Fixing optimum quantity by considering Marginal Cost and Marginal Revenue.

Appalachian Coal mining believes it can enhance labor productivity and therefore 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 reduction of one unit of pollution in 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: EM1318032

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