7. Suppose the total benefit and total cost to society of various levels of pollution reduction are as follows:

(1) Pollution Reduction (units) (2) Total Benefit (3) Total Cost (4) Total Net Benefit (5) Marginal Benefit (6) Marginal Cost 0 $0 $0 — — 1 $20 $9 2 $38 $20 3 $54 $33 4 $68 $48 5 $80 $65 6 $90 $84

a. Complete column (4).

b. Use total net benefit in column (4) to show that if the U.S. Environmental Protection Agency (EPA) wants to maximize total net benefit, then it should require 3 units of pollution reduction.

c. Complete columns (5) and (6), starting with the step from 0 to 1 unit of pollution reduction.

d. Show that the Principle of Optimization at the Margin also implies that the EPA should require 3 units of pollution reduction.