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# How much profit will be associated with that level of production?

Grunnings produces drills. The profits associated with drill production are &#61552; = 50Q - Q2, where Q is the number of drills produced. The marginal profits (additional profit for each drill produced) are M&#61552; = d&#61552;/dQ = 50 - 2Q.

(a) Unregulated, how many drills will Grunnings produce? How much profit will be associated with that level of production?

Drill production is not only noisy, but also polluting. The noise affects the immediate neighbors, while the pollution only affects surrounding communities, not the neighbors. The damages (costs) associated with the noise are:
DN = Q2/2, with marginal damages MDN = dDN/dQ = Q
The damages (costs) associated with the pollution are:
DP = Q2/2, with marginal damages MDP = dDP/dQ = Q

(b) What are the total damages (costs) associated with drill production? What is the sum of marginal damages associated with drill production?
(c) What are the profits, damages to each group, total damages, and net benefits to society of the unregulated level of drill production?
(d) What is the efficient level of drill production? What are the profits, damages to each group, total damages, and net benefits to society of the efficient level of drill production?

#### Solution Summary

What is the efficient level of drill production? What are the profits, damages to each group, total damages, and net benefits to society of the efficient level of drill production?

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