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Suppose marginal cost of abating X units of pollution is given by: MC(X) = 2X and marginal benefits are MB(X) = 6 - X when
Suppose marginal cost of abating X units of pollution is given by: MC(X) = 2X and marginal benefits are MB(X) = 6 - X when X 6. Current pollution = 9. a) What is the optimal level of pollution abatement, X*? How much pollution is remaining when X= X*? b) What is marginal cost, marginal benefit, and the level of total net benefit when X=X*? c) What is the total net benefit of a rule that bans pollution completely? What is the total net benefit of allowing pollution to stay at 9 without any regulation? d) Suppose air pollution abatement in the U.S. was at X* in 2019 (that is, we had the ideal amount of air pollution given the costs and benefits of abatement). How might the pandemic have caused X* to change in recent years? Provide one (hopefully plausible) reason it may have shifted the cost curve. Is X* higher or lower as a result of the change? Provide one (hopefully also plausible) reason it may have shifted the benefit curve. Is X* higher or lower as a result of the change
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