Draw the marginal benefit curve for nutrient cleanup, Microeconomics

You are tasked with evaluating a project for reducing nutrient (nitrogen and phosphorus) loading into the Gulf of Mexico (GOM). These nutrients make their way into the GOM by way of the Mississippi River and primarily come from the runoff of chemical fertilizer and animal manure from Midwestern farms. They can trigger hypoxia (look it up) in the marine ecosystem, leading to "dead zones", unattractive and toxic algae blooms, and fish kills. A consultant for the National Oceanic and Atmospheric Administration (NOAA) estimates the following "marginal benefit" curve to fishermen and other affected communities for reductions in nutrient loads from their baseline (2010) levels: MB = 10-.1Q. Q is in units of millions of tons of nitrogen removed (so 1=1,000,000 tons). MB is in millions of dollars per million tons (so 1 = $1,000,000).

a. Draw the marginal benefit curve for nutrient cleanup given the equation above. Explain why the downward slope of this curve is reasonable (hint: what does this imply for the extra damage done by each extra unit of pollution as it is released into the ecosystem?). Finally, explain why this is a "demand curve" for pollution abatement.

b. Graphically, show how the total benefits of nitrogen removal can be calculated from the marginal benefit function at a reduction of 10 million tons (Q=10). Calculate these total benefits numerically.

c. Using the logic developed in the previous question, come up with an equation that gives you total benefits. In other words, come up with an equation of the total area of the "rectangle" and "triangle" that make up total benefits for any level of Q. (Note that I showed how to do this in class for a specific example. You should also be able to check your work by seeing if your equation can replicate your answer for part b.) Graph this equation (by hand or feel free to cut and paste from Excel or a similar graphic program).

d. Intuitively, explain why total benefits increase at a decreasing rate as the level of pollution abatement increases.

Posted Date: 4/1/2013 4:11:11 AM | Location : United States







Related Discussions:- Draw the marginal benefit curve for nutrient cleanup, Assignment Help, Ask Question on Draw the marginal benefit curve for nutrient cleanup, Get Answer, Expert's Help, Draw the marginal benefit curve for nutrient cleanup Discussions

Write discussion on Draw the marginal benefit curve for nutrient cleanup
Your posts are moderated
Related Questions
Determine the Returns to Scale Use the following production function and budget constraint to answer the questions below. Q = L + K                            1000 = 2L +

How base case NPV analysis is applied in financial risk management

buyers cannot tell whether any given car is a lemon. The percent of all cars that are lemons is theta. How much is theta when all cars offered are sold?

what is the combined total demand schedule for Delgian cocoa beans that European and USA consumers buy


use a graphical illustration to describe briefly what the influence of each of the following be on the market supply of labour,(a) an increase in immigrants, (b) a reduction in wag


Topic: Please choose a case study in water related area and analyse it from at least two angles (or more) by examining the technical side as well as the economical, social and poli

Suppose the demand curve for a consumer for coffee is: Q = 6 – 2P, where Q represents the number of cups per day and P is the price of coffee per cup.  Question: Sppose the co