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.
To understand how to variate between the Marginal Cost (MC) and Marginal Benefit (MB) in the context of waste site cleanup, we will follow the approach you provided.
1. Draw the graph:
- On the y-axis, label it as "Cost/Benefits."
- On the x-axis, label it as "% of Waste Cleaned Up."
- Draw a vertical line at 100% to indicate the maximum possible cleanup.
2. Downward sloping MB curve:
- The MB curve represents the marginal benefit obtained from cleaning up an additional percentage of waste.
- As the percentage of waste cleaned up increases, the marginal benefit decreases.
- This is because the first units of cleanup bring significant benefits, such as reducing pollution and improving environmental quality.
- However, as more waste is cleaned up, the additional benefits gained become smaller due to diminishing returns.
3. Upward sloping MC curve:
- The MC curve represents the marginal cost incurred by cleaning up an additional percentage of waste.
- Initially, the marginal cost is low as there may be low-hanging fruit or simple cleanup methods available.
- However, as the cleanup progresses, more effort, resources, and advanced technologies are required, resulting in increasing marginal costs.
- Moreover, the more waste that has already been cleaned up, the remaining waste may be harder to access and more costly to handle.
4. Point where MB crosses MC:
- The point where the MB curve intersects with the MC curve represents the optimal level of cleanup.
- At this point, the extra cost incurred from cleaning up further waste exceeds the additional benefits gained.
- Anything to the right of this intersection point indicates excessive cleanup.
- Excessive cleanup occurs when the costs of cleanup outweigh the benefits, leading to an inefficient allocation of resources.
It is worth noting that this graph and economic analysis provide a general conceptual understanding and may not reflect specific details or complexities associated with waste site cleanup.