What is the optimal effluent fee

Reference no: EM13175651

The cost of pollution emanating from the chemical industry (in billions of dollars) is

CP = 3 P + 3 P2

where P is the quantity of pollutants emitted (in thousands of tons). The cost of pollution control (in billions of dollars) is

CC = 7-5 P

a. What is the optimal effluent fee?

b. If the cost of pollution control falls by $1 billion at each level of pollution, does this alter your answer to part (a)?

Reference no: EM13175651

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