Question

If the marginal damage caused by a certain type of pollution is $100 billion and the marginal cost of abatement is $180 billion, then:

Answer 1

Options :

A) society would be better off with zero pollution.

B) society would be better off if emissions were increased.

C) command and control policies should always be used.

D) Society would be better off if emissions were reduced

Answer:

Explanation: The marginal damage resulting from an emission refers to the extra damage resulting from the extra unit of emission released. Whereby the marginal cost of abatement refers to the cost incurred in reducing one extra unit of pollution. Taking a look at the cost of marginal damage incurred, which is $100billion and the marginal cost of abatement which is $180 billion. From an economic standpoint, aive the abatement cost considerably outweighs the marginal damage, it spending $180 billion to cover for a loss of $ 100 billion seems unreasonable. Therefore the society will be better off if emissions were increased.