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Appalachian Coal Mining Case: Pollution Reduction

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Appalachian Coal Mining believes that it can increase labor productivity and, therfore, 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 - 10P

How much pollution reduction should Applachian Coal Mining undertake?

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Solution Summary

This posting offers help with calculating an optimization problem to find number of units of pollution reduction to undertake.

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This is a optimization problem.

The optimal level of pollution ...

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