Review the liabilities section of the balance sheet for Rings and Things. What problem can you identify with the payroll information, particularly as it relates to how much the one employee gets paid? What solution would you offer Janet and Omar?

A. Marginal benefit from the cleaner water is equal to the marginal cost of making the water cleaner.

Explanation:

Optimal pollution is reached when the marginal benefit of pollution equals the marginal cost of pollution:

MB = MC

This is because economists believe that a pollution level of zero is not economically efficient since the enviroment has a carrying capacity for pollution, and pollution is a requirement for economic development.

The same is true for a pollution level above the optimal point, because this would represent more costs for example in the form of respiratory diseases than the benefit from economic development.