Homework Help: Managerial Economics

Posted by Sharon Williams on Friday, May 25, 2007 at 7:01pm.

I am trying to understand how to variate between MC and MB using the theory of optimization the circumstance which a waste site could be made too clean. Note: Good answers are dispassionate and employ economic analysis.

Draw a graph, put cost/benefits on the y-axis, % of waste that is cleaned up on the x axis. Draw a vertical line at %100, or otherwise indicate the maximum possible cleanup. Now draw downward shaped MB curve. Employ good economic analysis on why it is downward sloping. Next draw an upward sloping MC curve. Again use good economic analysis. Anything to the right of the point where MB crosses MC is excessive cleanup -- it represents cleanup where the costs exceed the benefits.

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