In this lecture, we begin to connect the microeconomics foundations from the previous lecture to topics related to sustainability – specifically pollution abatement and conservation problems. We introduce the basic framework of benefits and costs and how maximal net benefits occur when marginal costs and marginal benefits are equal (the equimarginal principle). We discuss the basic concave shape of benefits curves and convex shape of cost curves and how they relate to the typical ordering of intervention strategies in sustainability.
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