Homework Answers
Given the marginal benefits and marginal costs of abatement, and that both Farm A and B have 10 units of pesticide runoff, a reduction of 40% is equivalent to reducing pesticide runoff by 4 units each.
(a) Marginal benefit of abatement by Farm A = MB ( 4) = $ 60. Similarly, marginal benefit to farm B = $60
thus, total benefit of abating 4 units each = 60 (4) + 60 ( 4) = $480.
(b) Marginal cost of abatement of Farm A = $ 40 and marginal cost of abatement of farm B = $27
Thus, total cost of abating 4 units of pesticide runoff each = 40 (4) + 27 (4) = $268
Ans. Total benefit of abatement policy = $480 and total cost = $268
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