Question

The states of Illinois and Wisconsin are trying to figure out how to clean up Lake Michigan. They’ve decided to reduce agricultural waste running into the lake by 60 units. The marginal abatement costs for reducing agricultural waste in both states are:

Illinois: MACI = 40 + QI

Wisconsin: MACW = 4QW

a) [6 points] Show the total-cost minimizing way (QI*, QW*) to divide up 60 units of agricultural waste abatement on a well-labelled graph.

60 units

b) [5 points] Calculate QI* and QW*. QI*=_________ QW* = ____________

c) [4 points] What is the cost of abating a unit of agricultural waste at QI* and QW*?

PI*=_______ PW* = _______

Answer 1