A city currently emits $16$million gallons (MG) of raw sewage into a lake that is beside the city. Table $12.13$shows the total costs (TC) in thousands of dollars of cleaning up the sewage to different levels, together with the total benefits (TB) of doing so. Benefits include environmental, recreational, health, and industrial benefits.

a. Using the information in Table $12.13$calculate the marginal costs and marginal benefits of reducing sewage emissions for this city.

b. What is the optimal level of sewage for this city? How can you tell?

The difference between successive total costs can be used to compute the marginal cost. Reducing sewage emissions costs $50,100,350,700$dollars. The marginal benefits are $800,500,550,150$respectively, and can be calculated by subtracting successive total benefits.

Externalities also incurred additional costs in the form of "external costs," lowering equilibrium quantity and raising equilibrium price.

A benefit received from the use of one additional unit of commodity or service is referred to as a marginal benefit.

The marginal cost is the difference in overall production costs as a result of manufacturing one more unit.

We can deduce from the table above that $4MG$is the most ideal sewage level because,

The biggest gap between total cost and total revenue is the most optimal level of sewage.