The optimal amount of pollution abatement occurs where the marginal
cost of reducing pollution is just equal to the marginal benefit from
doing so. MB represents the social marginal benefit of reducing pollution
by one unit. MC represents the social marginal cost of reducing pollution
by one unit. The optimal level of pollution abatement is where
. Notice that not all pollution is eliminated. For each unit up to
the marginal benefit derived from pollution abatement exceeds the
marginal cost. The total net benefit from the optimal amount of pollution
abatement is given by the shaded area. Any further efforts to reduce
pollution beyond would add more to social costs than to social
benefits.
Note that the figure is drawn in terms of the amount of pollution that is
abated rather than the total amount of pollution. We do this because
pollution abatement (rather than pollution itself) is a “good” of economic
Q∗,
MB=MC
Q∗,
Q∗