Question

What must be true about the relationship between marginal abatement cost and marginal damage cost to achieve the efficient level of pollution? While the efficient level can be defined in principle, why might policy instruments to obtain the efficient level be difficult to implement in practice?

Answer 1

At Socially efficient level of pollution Marginal abatment cost and marginal damage costs are equal.

MD=MAC

Total abatement costs and damages are at a minimum at this effecient level of pollution.

We can define marinal abatement cost as th cost of reducig one more unit of pollution.

Marginal damage is the additional damage caused by an additional unit of emmission.

It is very difficult to attain an effecient level of pollution in practise.Actually that activities gives us utility inevitably pollute.Factories produce goods and services but pollute the environment.we gain utility from transportation,but dump carbon monoxide to air by a car.The benefit we derive from pollution are indirect.We generate but suffer from pollution.Surely the benefits of something would exceed total cost by greatest possible amount.It breaks the principle that at  effecient level of pollution marginal benefit=marginal cost.More over the problem of getting an effecient amount of pollution arise because noone owns the property air.