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March 29, 2015

Homework Help: Marginal Analysis

Posted by Ed on Friday, June 1, 2007 at 10:50pm.

Applacian Coal Mine Co believes it can increase labor productivity and therefore, net revenue by reducing air pollution in its mines. It is estimated that the marginal cost for reducing pollution by installing additional capital equipment is MC = 40P....where P represents a reduction of one unit of pollution in the coal mines, the comapny feels that for every unit of pollution reduction the marginal increase in revenue (MR) is: MR=1,000 - 10P. How much pollution reduction should the coal mine company undertake?

Use algebra. Set MC=MR, then solve for P.

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