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3. (70 points) Farmers Zalim Chaudhry and Farooq Kadoowala each operate a farm in the same watershed. Each farmer uses water and fertilizer to produce
3. (70 points) Farmers Zalim Chaudhry and Farooq Kadoowala" each operate a farm in the same watershed. Each farmer uses water and fertilizer to produce both crops and polluted runoff (from nutrients in the fertilizer). Each farmer's marginal cost of abating polluted runoff are given by: Chaudhry = 3000Q@haudhry Ckadoowala = 5000Qkadoowala Where the marginal abatement cost of polluted runoff (C') is measured in Rs/ppm and Q4 is the quantity of polluted runoff abated in ppm. Currently, Zalim Chaudhry produces 60 ppm of polluted runoff, Farooq Kadoowala produces 40 ppm of polluted runoff, and neither farmer abates any runoff. Suppose the local district administration wants to reduce the total amount of polluted runoff generated by Zalim Chaudhry and Farooq Kadoowala by 60 percent. a. (10 points) Draw the marginal abatement cost curves for Zalim Chaudhry and Farooq Kadoowala with quantity of polluted runoff" in ppm on the horizontal axis and "marginal cost" in Rs/ppm on the vertical axis. Make sure to properly label your graphs. b. (15 points) What is each farmer's total cost of achieving the reduction through an equiproportionate abatement of polluted runoft? c. (10 points) In part (b), have Zalim Chaudhry and Farooq Kadoowala reduced polluted runoff at the lowest possible cost? Explain your answer. d. (25 points) What is each farmer's total cost of achieving the reduction if polluted runoff is abated cost-effectively? e. (10 points) Suppose that the 60 percent reduction in the total amount of polluted runoff generated by Zalim Chaudhry and Farooq Kadoowala leads to a total benefit of Rs 3.5 x 106 to society. Does the approach in part (b) or the approach in part (d) improve social welfare
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