Question

Journal of Environmental Economics and Management Vol. 13 (June 1986), an attempt was made to quantify the marginal benefits and marginal costs of U.S. Coast Guard enforcement activity in the area of oil spill prevention. His analysis suggests that the marginal per-gallon benefit from the current level of enforcement activity is $7.50, while the marginal per-gallon is $5.50. Assuming these numbers are correct, would you recommend that the Coast Guard increase, decrease, or hold at the current level their enforcement activity

Answer 1

Check the explanation

Step-by-step explanation:

Marginal benefit is $7.50.

Marginal cost is $5.50.

Marginal benefit is larger than the marginal cost, which shows net benefit for the society.

The efficient level occurs when marginal benefit and marginal cost both are equal.

Marginal benefit decreases as there is increase in production.

And, marginal cost increases as there is a increase in production.

So, there should be increase in production such that marginal benefit decrease and marginal cost increase till both get equal to each other.

So, it is recommended that the coast guard increase the level of their enforcement activity.

Answer 2

Minimal advantage is $7.50.

Minimal expense is $5.50.

Minimal advantage is bigger than the peripheral cost, which shows net advantage for the general public.

The proficient level happens when minor advantage and peripheral cost both are equivalent.

Peripheral advantage diminishes as there is increment underway.

Also, minor cost increments as there is an expansion underway.

Along these lines, there ought to be increment underway with the end goal that minimal advantage decline and minor cost increment till both get equivalent to one another.

In this way, it is prescribed that the coast guard risen the degree of their enforcement activity.