Question

You're the Los Angeles City Mayor and your Environemntal Protection Department creates a report stating that the city currently emits 16 million gallons (MG) of raw sewage into the L.A. River. Table 1 shows the total costs (TC) in thousands of dollars of cleaning up the sewage for different levels, together with the total benefits (TB) of doing so.

Table 1

Sewage Level Total Cost Total Benefit

16 MG Current Current

12 MG 50 800

8MG 150 1300

4 MG 500 1850

0 MG 1200 2000

1. Using the information in Table 1, calculate the marginal costs and marginal benefits of reducing sewage emissions for this city. Include the table here?

2.What is the optimal level of sewage for this city? How can you tell?

Answer 1