Econ 4th Edition by William McEachern

Exercise 6

EXTERNAL COSTS WITH VARIABLE TECHNOLOGY Think of an industry that pollutes the water and has access to variable technology for reducing that pollution. Graphically illustrate and explain the impact of each of the following, other things constant, on the optimal level of water quality for a given rate of output:
a. New evidence is discovered about a greater risk of cancer from water pollution.
b. The cost of pollution-control equipment increases.
c. A technological improvement reduces the cost of pollution control.