Pollution abatement policies will improve efficiency if

• A. The marginal cost of abatement is less than the marginal benefit of abatement
• B. Abatement has no benefit
• C. The marginal benefit of abatement is zero
• D. The marginal cost exceeds the marginal benefit

Answer: (A)

This question tests how efficiency in pollution policy depends on comparing the benefits and costs of reducing pollution. The key idea is that you want to expand abatement as long as each additional unit of pollution reduction adds more to society than it costs. That means the marginal benefit of abatement should exceed its marginal cost. When the marginal cost is less than the marginal benefit, there is a net gain from emitting less pollution, so increasing abatement raises welfare and improves efficiency. In efficient policy, MB eventually equals MC, but as long as MB > MC, pushing for more abatement moves you toward that efficient point. If the marginal benefit were zero or the marginal cost exceeded the benefit, further abatement would not improve welfare.