The John Amos power plan located in Winfield, WV is a coal fired plant. The combustion of coal results in the emission of sulfur dioxide (SO2) into the atmosphere. SO2 is known to cause respiratory illness and is a component of acid rain. Regulators are attempting to determine an efficient level of pollution. The following information is provided, the marginal damage costs (MDC) and marginal control costs (MCC), where Q = hundreds of tons of SO2 and all costs are measured in hundreds of dollars.
MDC=20Q
MCC = 400-5Q
a. Determine the efficient quantity of SO2 that should be released.
b. Draw a model that represents the MDC and MCC. Include the efficient quantity and label the areas of total costs for damages and control.
c. At the quantity determined in part A, what would be the total damage to the environment in terms of dollars? What would be the total cost of emission abatement?
d. Explain why the outcome you calculated in Part A is efficient.