Environmental Economics 7th Edition by Barry Field,Martha k Field

Exercise 1

Suppose that the following discrete numbers show the integer values of MWTP and MC as depicted in Figure 4.1. Determine the socially efficient rate of output. Show that at any other output level, the net benefits to society will be lower than they are at the efficient level. (Remember, the marginal cost of increasing output from 4 to 5 units is $9, which is also the amount by which cost decreases in going from 5 to 4 units.)

FIGURE 4.1 The Socially Efficient Rate of Output