Question

1a) What makes the efficient amount of pollution nonzero?

1b) Why are there “benefits” of pollution? In other words, from a company's economic profitability sense, when and how can it be profitable to pollute?

Answer 1

a) Sometimes the marginal cost of pollution abatement exceeds the marginal benefits , then continuing pollution abatement would be inefficient and wastage of resources . If the marginal cost of pollution abatement is just equal to the marginal benefit from pollution abatement, then the point where society's welfare has been maximized is reached with respect to environmental quality . Further cleaning would raise cost and reduce benefits . It will cause reduction in welfare . So efficient amount of pollution is not zero .

b) If can be profitable to pollute if it causes cost to production to fall . Suppose a company manufactures a product X which creates air pollution . Now a company if tries to eliminate all the pollution generated then the cost of producing X will rise tremendously as technology to eliminate pollution is costly . So the company tries to eliminate only a part of pollution generated and allows pollution following the standard scientific level . The reduces cost of production and increases economic profit .