Suppose a city releases 16 million gallons of raw sewage into a nearby lake. Table 12.8

Chapter 12, Problem 10

(choose chapter or problem)

Suppose a city releases 16 million gallons of raw sewage into a nearby lake. Table 12.8 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.) Total Cost (in thousands of dollars) Total Benefits (in thousands of dollars) 16 million gallons Current situation Current situation 12 million gallons 50 800 8 million gallons 150 1300 4 million gallons 500 1650 0 gallons 1200 1900 Table 12.8 a. Using the information in Table 12.8, calculate the marginal costs and marginal benefits of reducing sewage emissions for this city. See Cost and Industry Structure if you need a refresher on how to calculate marginal costs. b. What is the optimal level of sewage for this city? c. Why not just pass a law that zero sewage can be emitted? After all, the total benefits of zero emissions exceed the total costs.