Using a graph like Figure, show the effect on the determination of the socially optimal amount of
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1. Some technological change that lowers the marginal cost of achieving every level of pollution reduction.
2. A discovery that there are greater health risks associated with every given level of pollution than were previously thought to be thecase.
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Marginal cost of pollution reduction MC Marginal benefit MC MB of pollution reduction MB Reduction in pollution p* 100%
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The area that constitutes the net benefits Thats the triangular area above the MC ...View the full answer
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