Optimal Pollution Abatement Level
A regulatory agency has estimated the marginal costs and marginal benefits (in millions of dollars) for reducing a specific pollutant. The data is presented in the table below.
| Units of Pollutant Reduced | Marginal Cost of Reduction | Marginal Benefit of Reduction |
|---|---|---|
| 1st unit | $3 | $12 |
| 2nd unit | $5 | $10 |
| 3rd unit | $7 | $7 |
| 4th unit | $10 | $4 |
| 5th unit | $14 | $2 |
Based on this data, what is the optimal number of pollutant units to reduce to maximize the net benefit to society? Explain your reasoning using the relationship between marginal costs and benefits.
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