Unformatted text preview: redeveloping part of an old abandoned industrial site near the center of a city. Such areas are called "brownfields" and are a big problem for many cities because they are unsightly and may be polluted. Redeveloping them often produces big external benefits. Suppose in this case the marginal benefit the firm gets is given by the function: MBp(Q) = 2000 - 5Q where Q is the number of acres redeveloped. In addition, redeveloping gives the city $100 of external benefits per acre: MBe(Q) = 100 The MSB of redevelopment are given by: MSB(Q) = MBp(Q) + MBe(Q) = (2000 - 5Q) + 100 = 2100 - 5Q...
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- Spring '12
- MSB, Marginal social benefit, private marginal benefit, total marginal benefit