Americans have become passionate consumers of the Asian hot sauce Sriracha. Sriracha is produced by Huy Fong Foods in Irwindale, California. Each year the company processes over 100 million pounds of chili peppers to make their delectable sauce. But roasting all of those chili peppers has had an unintended consequence: pollution.

Recently, local residents began complaining about a pungent odor from the plant that they believed led to heartburn, nosebleeds, and coughing.

The hypothetical table shows the estimated marginal social benefit (MSB) and marginal social cost (MSC) of pollution that arises from odor emissions.

a. How can the pollution that results from Sriracha production have a marginal social benefit?

b. Graph the marginal social cost and marginal social benefit of odor.

c. What is the market-determined quantity of odor?

d. What is the social gain from reducing the market-determined quantity of odor by one odor unit?

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Quantity of odor emissions (thousands of odor units) 0 Marginal social benefit ($ per odor unit) $80 Marginal social cost ($ per odor unit) $0 1 72 8 2 64 40 16 3 56 24 4 48 5 16 32 40 40 40 32 48