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Unformatted text preview: MC(X) = X and marginal benefits are MB(X) = 6 X. a) What is the value of total costs and total benefits at X*? b) Are we better off doing nothing or setting X = 6? In a sentence or two discuss the realism of this MB curve in describing clean water (i.e. the abatement of pollution into a water supply). 4. Sketch a set of total cost and benefit curves with the following properties: i) Both curves are concave ii) The maximum of net benefits occurs where X* is both finite and greater than zero. Sketch the corresponding marginal cost curves. Which has the steeper slope? 5. Argue in a sentence or two why the maximum of net benefits would be infinite if the marginal benefit curve crosses the marginal cost curve once from below (moving from left to right on the standard figure for abatement)....
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- Fall '09