Answer:
The correct answer is 0.5 pounds of pollutant.
Step-by-step explanation:
According to the problem the cost of controlling emissions at a firm is given by:
C(q) = 1,260 + 100 × , where q is the reduction in emissions (in pounds of pollution per day) and C is the daily cost to the firm (in dollars) of this reduction.
Government clean-air subsidies amount to $100 per pound of pollutant removed per day.
Net cost = C(q) - Subsidy
⇒ Net Cost = 1,260 + 100 × - 100 × q.
In order to minimize net cost we calculate, (Net cost) = 0.
⇒ 200 × q - 100 = 0
⇒ q = 0.5
We can see that the second order derivative is positive and thus the net cost minimizes.
Thus the firm should remove 0.5 pounds of pollutant each day in order to minimize net cost.
