Consider the following costs and benefits associated with cleaning up a polluted city lake.

a. Explain why the marginal cost of pollution reduction increases as the cleanliness of the water increases. Plot the MC curve in a diagram.
b. Explain why the marginal benefit of pollution reduction falls as the cleanliness of the water increases. Plot the MBcurve in the same diagram.
c. What is the optimal level of water cleanliness?
d. Explain why the efficient level of pollution is greater than zero.

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Cleanliness of Water (%) 20 40 60 80 100 Marginal Cost (S) 50 000 100 000 160 000 230 000 350 000 infinite Marginal Benefit ($) 550 000 400 000 300000 230 000 180 000 150 000