Assume you are responsible for assessing whether the air quality standard for carbon monoxide (CO)

is set at the efficient level for some region. To accomplish this task, you have estimated the following

marginal cost/benefit functions for CO abatement:

Marginal social benefit:

MSB

= 20

0

.

25

A

Marginal abatement cost:

MAC

mkt

= 6 + 0

.

25

A

Marginal cost of enforcement:

MCE

= 2 + 0

.

1

A

where A is the percentage of CO abatement, and the marginal cost/benefit functions are measured in

millions of dollars.

a) Find the MSC of abatement

b) Solve for the efficient level of abatement.

c) Show the importance of the MCE by determining the effect on the solution if these government costs

were ignored. Support your answer algebraically and graphically.