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managerial economics

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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 addtional capital equipment is mMC=40p
where p represents a reduction of one unit of ppllution in the mines. It also feels that for every unit of pollution reduction the margiinal increase in revenue ( MR) is MR=1,000-10P. How much pollution reduction should Appalachina Coal Mining undertake?

  • managerial economics - ,

    Set MC = MR and solve for P. That is 40P = 1000-10P

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