Bus 640

Appalachian Coal Mining believes that it can increase labor productivity and, there- fore, net revenue by reducing air pollution in its mines. It estimates that the marginal cost function for reducing pollution by installing additional capital equipment is

MC 40P where P represents a reduction of one unit of pollution in the mines. It also feels that for

every unit of pollution reduction the marginal increase in revenue (MR) is MR 1,000 10P

How much pollution reduction should Appalachian Coal Mining undertake?

Appalachian Coal Mining decided to install additional capital equipment, they would decrease the amount of pollution that their company produces. This installation of additional capital equipment will also lead to an increase in labor productivity. However, when assessing the...