Part 4/8:
But what is this efficient level of pollution? Contrary to the assumption that zero pollution is the ideal, Coase's insight indicates that some pollution level is necessary for economic activities to continue. Economic benefits derived from production must be weighed against environmental costs.
When analyzing pollution through a supply and demand framework, efficiency is achieved when the marginal benefit of reducing pollution equals the marginal cost of that reduction. As pollution is reduced, the cost of further reductions often increases while the benefits decline, making it crucial to balance these factors.