# Microeconomics - cost

Find economics marginal cost and total cost

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...\$3, and \$7 for the reduction of 3 units of pollution, total \$11
<br>d) \$1+\$2+\$3 = \$6 total
<br>e)\$11 for Acrid Acid and \$6 for Smelly Smelter is \$17 total.
<br>f,g,h) same as c,d,e
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<br>Now, it is important to realize that Smelly Smelter (SS) can clean up its pollution more cheaply than Acrid Acid (AA) can after the first unit of abatement. This is because the marginal cost of each addition unit of abatement is lower for SS than for AA.
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<br>Thus, requiring a 3 unit abatement by each firm does not minimize costs, the abatement should come from the source that has the lowest marginal cost to minimize total cost.
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<br>If each unit of pollution were taxed, the companies would need to look at their marginal cost tables and decide what is less expensive for them - abatement, or suffering taxes.
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<br>i) AA would rather pay \$1 and \$3 to abate the first two ...