In some states, mining for coal leaves large mounds of rubble, which poses flood

Question

In some states, mining for coal leaves large mounds of rubble, which poses flooding problems, causes land damage, and is unsightly. The following table shows the estimated annual social benefits and costs of restoring various amounts of such land:

(a) Compute the marginal social benefits and the marginal social costs for each restoration level:

Instructions: Enter your responses as a whole number.

(b) What is the optimal rate of land restoration?

acres

Land restored (in acres) 0 100 200 300 400 500 Social benefits (per 100 acres) 0 $110 $200 $280 $350 $420 Social costs (per 100 acres) 0 $50 $120 $200 $300 $430

Explanation / Answer

a)

130$

b) Optimal rate is rate at which

Marginal Social Benefit = Margnal social cost (=80 here)

So land restored = 300 acres

Land restored (in acres) 0 100 200 300 400 500 Marginal social benefit (per 100 acres) - 110$ 90$ 80$ 70$ 70$ Marginal social cost (per 100 acres) - 50$ 70$ 80$ 100$

130$

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