Question

If pollution coming from factories is bad, then why would the socially optimal level of pollution not be zero?

Answer 1

The socially optimal level of pollution can not be zero, this is because that value is not practical, feasible, efficient or effective. Pollution comes with production processes; production processes can not be stopped because the economy of the nation depend on it, thus pollution is inevitable.
The socially optimal level of pollution is that level at which the marginal benefits derived from the pollution is equal to the marginal cost of production. At this point, the net benefits to the society is maximized.<span />