1) For question (1), answerbothof the options below:

1a) Does it make sense to attempt to eliminateallpollution, or is there an "optimal" amount of pollution?Explain.

1b) Suppose a city releases 16 million gallons of raw sewage into a nearby lake. The table below 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 (thousandsof $) Total Benefits (thousandsof $)

16 million gallons Current situation Current situation

12 million gallons 50 800

8 million 150 1300

4 million gallons 500 1850

0 gallons 1200 2000

Using the information in the table, 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.}

*What is the optimal level of sewage for this city?

*Why not just pass a law that zero sewage can be emitted? After all, the total benefits of zero emissions exceed the total costs.