The Table Below Shows The Total Costs And Marginal Costs Of Cleaning Up The Sewage To Different Levels Together With The Total Benefits Of Doing So

Suppose a city releases 16 million gallons of raw sewage into a nearby lake. The table below shows the

Question

1. Suppose a city releases 16 million gallons of raw sewage into a nearby lake. The table below shows the

total costs and marginal costs of cleaning up the sewage to different levels, together with the total benefits of doing so. (Benefits include environmental, recreational, health, and industrial benefits.)

A. What is the optimal level of sewage for this city? Explain making references to economic concepts.

B. Why not just pass a law that firms can emit zero sewage? After all, the total benefits of zero emissions exceed the total costs. Explain making references to economic concepts.

Attached is a chart with further information. Thank you.

Total Cost (in
Marginal Cost
Total Benefits
Marginal
thousands of
(in thousands
(in thousands
Benefit (in
dollars)
of dollars)
of dollars)
thousands of
dollars)
16 million
Current
Current
gallons
situation
situation
12 million
50
50
800
800
gallons
8 million
150
100
1300
500
gallons
4 million
500
350
1650
350
gallons
0 gallons
1200
700
1900
250Economics