Final answer:
The socially optimal amount of pollution abatement occurs where the marginal benefits of abatement are equal to the marginal costs. This balance ensures efficient resource allocation and prevents over-investment in pollution abatement measures where the cost exceeds the societal benefit.
Step-by-step explanation:
The question is related to finding the socially optimal amount of pollution abatement, and within economics, this typically involves marginal analysis. To achieve this optimal level of pollution abatement, a balance must be struck between the marginal costs of pollution abatement and the associated benefits. The optimal level of pollution abatement occurs where the marginal benefits of abatement are equal to the marginal cost of abatement. This is identified where additional pollution abatement costs are equal to the value of the environmental benefit derived from that last unit of pollution reduction.
Using the tools of marginal analysis, we can see that at a point where pollution is extensive, there are many low-cost opportunities to reduce pollution, which confer high marginal benefits. As we aim for higher levels of environmental protection, these opportunities become less, and we have to resort to more expensive methods, causing the marginal cost curve to rise. At the same time, the largest marginal benefits are realized first, and, as we continue to reduce pollution, the incremental benefits decline. This means that at some point, further pollution reduction does not yield enough benefit to justify the cost, which is inefficient resource allocation.
The optimal amount of pollution abatement is thus found at the point where the marginal cost of pollution reduction is equivalent to its marginal benefit. This is the socially efficient level of environmental protection, beyond which the costs outweigh the benefits.