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Fixing optimum quantity by considering the Marginal Cost and Marginal Revenue.

Appalachian Coal mining believes 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 Coal mining undertake?

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