Question

The cost of controlling emissions at a firm rises rapidly as the amount of emissions reduced increases. Here is a possible model: 100q2 C(q)6,000+ where q is the reduction in emissions (in pounds of pollutant per day) and C is the daily cost (in dollars) of this reduction (a) If a firm is currently reducing its emissions by 30 pounds each day, what is the marginal cost of reducing emissions further? per one pound reduction in daily emissions (b) Government clean-air subsidies to the firm are based on the formula S(q) 500q where q is again the reduction (in pounds per day) and S is the subsidy (in dollars). At what reduction level does the marginal cost surpass the marginal subsidy? pounds of pollutant per day (c) Calculate the net cost function, N(q) C(q) - S(q), given the cost function and the subsidy above. N(q) = Find the value of q that gives the lowest net cost pounds of pollutant per day What is this lowest net cost? $ per day Compare your answer to that for part (b) and comment on what you find This value is -Select q in part (b)

Answer 1

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