The marginal social costs and abatement costs of a certain type ...

[vicky]

The marginal social costs and abatement costs of a certain type of air pollution for a factory are given as:
 
  MSC = -1121 + 22.5Q MCA = 879 - 17.5Q,
  where Q = units of pollution per day, and MSC and MCA are measured in dollars. The factory is located in a small town that is currently setting community standards. You have been hired to perform the analysis requested below.
 
  a. If the community wishes to set a pollution standard for the factory, what daily level of pollution should be allowed?
  b. As an alternative, some members of the town council favor an emissions tax for the factory. If a tax is implemented, at what level should the tax be set?

Question 2

Recently, Skooterville has experienced a large growth in population. As a result, the demand curve for telephone service in Skooterville:
 
  A) has shifted to the right.
  B) has shifted to the left.
  C) has shifted down.
  D) Both B and C are correct.
  E) none of the above

[lou]

Answer to Question 1

a.
To determine the optimal level of pollution, we equate MSC to MCA
-1121 + 22.5Q = 879 - 17.5Q
-2,000 = -40Q
Q = 50
50 units of pollution is optimal.

b.
To determine tax, examine MSC or MCA at optimal level.
MCA = 879 - 17.5(50 )
MCA = 4
set tax = MCA = MSC = 4.

Answer to Question 2

A