The figure below illustrates the marginal cost of pollution control for a small

Question

The figure below illustrates the marginal cost of pollution control for a small pulp mill if it discharged 18,000 gallons daily prior to the control being instituted.. Local authorities have just imposed an effluent charge of a. $0.20 per gallon of effluent in an effort to reduce water pollution. How much effluent will the mill now discharge? b. $0.80 per gallon of effluent in an effort to reduce water pollution. How much effluent will the mill now discharge? c. If local authorities raise the charge to $1.20 per gallon; will the amount of effluent the mill discharges drop substantially? Why? 2.00 1.80 1.60 1.40 Costs 1.00 .60 O 8 III 2 4 6 8 10 12 14 16 18 20 Quantity of Effluents Controlled per Day (1,000s of Gallons)

Explanation / Answer

a) Effluent charge = $0.20 per gallon

Effluents controlled = 6000 gallons

Effluent discharged = 18000 - 6000 = 12000 gallons

b)

Effluent charge = $0.80 per gallon

Effluents controlled = 12000 gallons

Effluent discharged = 18000 - 12000 = 6000 gallons

c)

Effluent charge = $1.20 per gallon

Effluents controlled = 13500 gallons

Effluent discharged = 18000 - 13500 = 4500 gallons

The amount of effluent discharged will not drop substantially because the marginal cost of controlling quantity of effluents discharged is increasing at an increasing rate.

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