Appalachian Coal Mining believes that it can increase labor productivity and, therefore, net revenue by reducing air pollution in its mines. It estimates that the marginal cost function for reducing pollution by installing additional capital equipment is MC = 40P where P represents a reduction of one unit of pollution in the mines. It also feels that for every unit of pollution reduction the marginal increase in revenue (MR) is MR = 1,000 - 10p How much pollution reduction should Appalachian Coaql Mining undertake?

Question

Appalachian Coal Mining believes that it can increase labor productivity and, therefore, net revenue by reducing air pollution in its mines.  It estimates that the marginal cost function for reducing pollution by installing additional capital equipment is MC = 40P  where P represents a reduction of one unit of pollution in the mines.  It also feels that for every unit of pollution reduction the marginal increase in revenue (MR) is    MR = 1,000 - 10p   How much pollution reduction should Appalachian Coaql Mining undertake?