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    Cost-Benefit Analysis of Pollution Control in Appalachian Coal Mining

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    Appalachian Coal Mining believes that it can increase labor productivity and, therefore, net revenue by reducing air pollution in its mines. It estimates that the marginal cost function for reducing pollution by installing additional capital equipment is:

    MC = 40p

    Where P represents a reduction of one unit of pollution in the mines. It also feels that for every unit of pollution reduction the marginal increase in revenue (MR) is

    MR = 1,000 - 10 P

    How much pollution reduction should Appalachian Coal Mining undertake?

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    For profit maximization, the marginal cost of reducing pollution by installing ...

    Solution Summary

    This solution provides a brief discussion and calculations for the cost benefit analysis of reducing pollution, concluding with how much the company should reduce pollution to maximize profit.