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The amount of pollution and the cost involved in pollution abatement are optimal when a

Marketing Dec 29, 2020

The amount of pollution and the cost involved in pollution abatement are optimal when

a. The marginal social benefit of production is less than the marginal social cost of production.

b. The marginal social benefit of production equals the marginal social cost of production.

c. The marginal social benefit of production exceeds the marginal social cost of production.

d. The marginal social benefit of production equals the marginal cost of production.

Expert Solution

The amount of pollution and the cost involved in pollution abatement are optimal when b. The marginal social benefit of production equals the marginal social cost of production.

This is similar to the Profit Maximization Rule in reverse. Here, the cost-minimizing balance is obtained when the marginal benefit of eliminating pollution is equal to the marginal benefit to society of eliminating it. It is impractical and unrealistic to set the goal of 100% pure air or water because the cost would far exceed the benefit. Instead, government scientists will determine how much pollution we can afford to eliminate, and then the government will determine how to pay for that - either by taxes on everyone, or specific taxes or fines to the polluters, or price increases on each product purchased.

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