Question

A chemical plant pollutes a river that serves as the water supply for a nearby town. From an economist's point of view, pollution from the plant should be reduced until the Your answer:

A. marginal benefit from the cleaner water is equal to the marginal cost of making the water cleaner
B. marginal benefit from cleaner water is maximized
C. total benefit from cleaner water is zero
D. total benefit from cleaner water is equal to the total cost of making the water cleaner
E. total benefit from cleaner water is maximized

Answer 1

Answer:

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.