Suppose that the state of Connecticut is attempting to set a water quality standard, where water quality is measured as the percent of mercury abated (A). The marginal social benefit (MSB) and marginal social cost (MSC) of abatement have been estimated as follows:
MSB = 40 - 0.1A
MSC = 36 + 0.25A
The state's department of environmental protection sets the standard at 20%.
a) Is this standard set efficiently, too stringently, or too leniently? (Explain your reasons)
b) If this abatement level is not equilibrated, then what is the equilibrium point in terms of % abated and monetary equilibrium.