12.4

Question 1

What happens to marginal cost of reducing pollution as reductions increase?

Answer 1

Marginal cost of reducing pollution increases: Easy reductions come first; harder and costlier reductions happen later.

Question 2

What happens to marginal benefits of reducing pollution as reductions increase?

Answer 2

Marginal benefits of reducing pollution decrease: The biggest benefits come from the first reductions; later ones provide less benefit.

Question 3

What occurs at low environmental protection levels (QA)?

Answer 3

At low environmental protection levels (QA): High pollution, easy reduction options, high benefits.

Question 4

What occurs as environmental protection increases (QB to QC)?

Answer 4

As protection increases (QB to QC): Costs rise, benefits decrease.

Question 5

What is the outcome at QC regarding marginal costs and benefits?

Answer 5

At QC, marginal costs exceed marginal benefits → inefficient allocation of resources.