A chemical plant pollutes a river that serves as water supply. To maximize welfare, pollution should be reduced until

• A. The marginal benefit of cleaner water equals the marginal cost of making water cleaner
• B. The marginal benefit equals zero
• C. The cost of abatement equals zero
• D. The marginal cost of cleaner water exceeds the marginal benefit

Answer: (A)

Efficient pollution abatement happens where the benefit society gets from a bit cleaner water equals the cost of achieving that extra cleanup. Early reductions in pollution provide large health and ecological gains (high marginal benefit), while costs rise as you push for even cleaner water. When MB and MC are equal, any further reduction would cost more than it’s worth, and any less reduction would waste potential benefits. That balance point is why pollution should be reduced until the marginal benefit of cleaner water equals the marginal cost of abatement.

The other ideas miss this balance: waiting for zero benefit would ignore the real, positive gains from cleaner water; assuming zero abatement cost isn’t realistic and would push abatement beyond the efficient point; and stopping only when the cost exceeds the benefit ignores the welfare gain that occurs up to the equality point.