Springville, Virginia, is interested in improving the quality of its lake by dec

Question

Springville, Virginia, is interested in improving the quality of its lake by decreasing the level of water pollution. (Note that Springville is already meeting required environmental regulations.) The level of a chemical pollutant in a lake is measured in parts per million (ppm). The lake currently has a pollution level for this chemical of 100 parts per million. The table to the right shows the costs associaterd with cleaning the lake. Amount of Cleanup Total Cost 10 ppm cleaner 20 ppm cleaner 30 ppm cleaner 40 ppm cleaner $192,000 $395,000 $650,000 $1,020,000 2.4. Springville gets its drinking water from the lake. If it can reduce the amount of pollution in the lake, on treating drinking water and still achieve the same level of safety. The table below represents the cleaning the lake and the marginal benefits (in terms of reduced costs for treating drinking water) marginal costs of Cleanup Marginal Cost Marginal Benefit 1st 10 ppm of deanup $192,000 2nd 10 ppm of cleanup 3rd 10 ppm of cleanup 4th 10 ppm of cleanup $203,000 $255,000 $370,000 $238,000 $274,000 $305,000 355,000 Based on the econo mic costs and benefits, which of these four levels of cleanup would be sensible for the community to

Explanation / Answer

ANSWER is clearly B. The reason is that upto this level marginal benefit >marginal cost. For 40 ppm cost >marginal benefit so it doesn't make sense

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