3. MARGINAL ANALYSIS. This example problem goes over the degree of comfort experienced at different levels of clean water. The different peso value amounts are shown for every 20% increase in clean water. We want to find the optimum amount of clean water that we should have in this area, and it is important to remember that there is an optimal amount of pollution. Having 100% clean water is probably never going to be the solution. As we would expect, the more clean water we have in our economy, the higher the benefit we receive (we prefer clean water over dirty water). However, as we produce (or clean) more of the clean water we also incur a cost. As more clean water is present, the higher our costs. Note that benefits here is the same as utility. Total Benefits Total Cost % of Clean Water 0% 20% 50 45 85 40% 100 60% 80% 90 155 160 120 100% 180 155 Find the MC and MB. At what % of Clean Water do we have the best option to be adopted?

3. MARGINAL ANALYSIS. This example problem goes over the degree of comfort experienced at different levels of clean water. The different peso value amounts are shown for every 20% increase in clean water. We want to find the optimum amount of clean water that we should have in this area, and it is important to remember that there is an optimal amount of pollution. Having 100% clean water is probably never going to be the solution. As we would expect, the more clean water we have in our economy, the higher the benefit we receive (we prefer clean water over dirty water). However, as we produce (or clean) more of the clean water we also incur a cost. As more clean water is present, the higher our costs. Note that benefits here is the same as utility. Total Benefits Total Cost % of Clean Water 0% 20% 50 45 85 40% 100 60% 80% 90 155 160 120 100% 180 155 Find the MC and MB. At what % of Clean Water do we have the best option to be adopted?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter12: Environmental Protection And Negative Externalities

Section: Chapter Questions

Problem 5SCQ: Consider two approaches to reducing emissions of CO2 into the environment from manufacturing...

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11 When performing a benefit cost analysis of different options to provide clean water to a community, the option that should be chosen is the option that maximizes the benefit to cost ratio. True or False?
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