Question: Using a graph like Figure, show the effect on the determination of the socially optimal amount of pollution-reduction effort of the following:
1. Some technological change that lowers the marginal cost of achieving every level of pollution reduction.
2. A discovery that there are greater health risks associated with every given level of pollution than were previously thought to be the case. If you understand that for economists, the optimum for nearly all decisions occurs at the point at which marginal benefit equals marginal cost, then you have gone a long way toward mastering the microeconomic tools necessary to answer most questions that we will raise in this book.
