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 (SO 2) into the atmosphere. SO 2 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 SO 2
and all costs are measured in hundreds of dollars.
MDC = 20Q
MCC = 400 - 5Q
a. Determine the efficient quantity of SO 2 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.