Looking at controlling government roles in managing health risks in society it faces from exposure to environmental pollution. One major problem that was examined was the cleanup of hazardous waste sites. Some people were extremely critical of policymakers who wish to see waste sites 100 percent clean. (a)Explain using the theory of optimization and a graph, the circumstances under which a waste site could be made "too clean" (Good answers are dispassionate and employ economic analysis) (b) If society can enjoy virtually all the health benefits of cleaning up a waste site for only a "small fraction" of the total cost of completely cleaning a site. Using graphical analysis, illustrate this situation (hint: Draw MB and MC curves with shapes that specifically illustrate this situation)
your hint is, in my opinion, the solution; draw MB and MC curves. When doing envirnomental cleanup, one naturally thinks of doing the cheap and easy things first. This, very often, gets rid of a large percent of the problem. The next things that are done are harder and more expensive, but, ironically, don't eliminate as much of the problem as the first simple solution. Finally, often a polutant is 99.9% gone. However getting that last 1/10 of 1% is extremely expensive. Yet, how important is it to get rid of that last amount?
This said, we can then draw a typical MB, MC curves. MB starts high and is downward sloping, often shaped like a concave lens. MC starts very low and is a rising curve. It is often almost flat at the start and very steep at the end. Finally, total cost is the area under the MC curve and total benefit is the area under the MB curve.
In drawing what does it actually look like, I am not getting it.Help
MB MC curves. What is a concave shape?
To understand the concept of optimization and its application to waste site cleanup, we can start by looking at the theory of optimization and using graphical analysis.
(a) Circumstances under which a waste site could be made "too clean":
When applying optimization theory, it is important to consider the trade-off between the benefits and costs of cleaning up a waste site. Allocating resources to cleanup efforts has an opportunity cost, meaning that resources used for one purpose cannot be used for another purpose. In the case of waste site cleanup, policymakers may aim to achieve a 100 percent clean site. However, it is possible for a waste site to be considered "too clean" if the cost of achieving that level of cleanliness outweighs the additional benefits gained.
Graphically, we can represent this situation using a marginal benefit (MB) curve and a marginal cost (MC) curve. The MB curve represents the additional benefit society receives from each additional unit of cleanup, while the MC curve represents the additional cost of achieving each additional unit of cleanup.
In the context of waste site cleanup, the MB curve may start high and gradually decrease, taking the shape of a concave lens. This shape implies diminishing marginal benefits, meaning that each additional unit of cleanup provides fewer and fewer benefits than the previous unit. The initial cleanup efforts might be relatively easy and cost-effective, resulting in significant benefits. However, as cleanup progresses, the marginal benefit decreases, indicating that the additional benefits gained become progressively smaller.
On the other hand, the MC curve starts very low and rises steeply. At the beginning, the curve is relatively flat, indicating that the initial cleanup efforts are relatively inexpensive. However, as the cleanup becomes more extensive, each additional unit of cleanup becomes increasingly expensive, leading to a steeper slope of the MC curve.
To determine if a waste site is "too clean," we need to compare the MB and MC curves. The optimal level of cleanup occurs where the MB equals the MC, as it represents the level of cleanup that maximizes society's net benefits. If the MC surpasses the MB at a certain point, it implies that the additional costs of achieving further cleanup outweigh the additional benefits gained. This would be the situation where the waste site is considered "too clean," and policymakers might decide that the optimal level of cleanup is at a point where the benefits are still significant but the costs are not excessive.
(b) Illustrating the situation where society can enjoy most health benefits at a fraction of the total cost:
Using graphical analysis, we can demonstrate a situation where society can achieve significant health benefits from cleaning up a waste site at a fraction of the total cost of complete cleanup. In this case, the MB curve would still start high but might decrease at a slower rate compared to the MC curve. This implies that the initial cleanup efforts provide substantial benefits while still being relatively inexpensive.
The MC curve, on the other hand, would start low and rise more steeply, indicating that the initial cleanup efforts are cost-effective, but the costs escalate rapidly as more extensive cleanup is pursued. The steep slope of the MC curve suggests that achieving complete cleanup would involve significant costs.
When drawing the MB and MC curves, make sure to label the axes correctly to represent the level of cleanup on the x-axis and the benefits or costs on the y-axis. The MB curve should begin at a high point and gradually decrease, while the MC curve should start low and rise steeply.
By comparing the two curves, you can visually see that the initial cleanup efforts provide a substantial amount of benefits while costing significantly less than complete cleanup. This demonstrates the situation where society can enjoy most of the health benefits at only a fraction of the total cost of completely cleaning up the waste site.
Remember that the total cost is represented by the area under the MC curve, while the total benefit is represented by the area under the MB curve. Understanding the shape and relationship between these curves helps in evaluating the optimal level of cleanup and determining if further cleanup efforts are justified based on the diminishing marginal benefits and increasing marginal costs.