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If firms adopt costly technology that reduces domestic pollution what short-run effect on GDP and welfare is possible?

Answer and explanation

Correct answer: Measured output growth may slow while health benefits raise welfare

GDP measures recorded market production, whereas welfare also includes health and environmental conditions. In the short run, costly pollution-control technology can raise firms’ costs and slow measured output growth. However, cleaner air may reduce illness, medical burdens, and lost working days, creating social benefits that GDP does not fully record. Therefore, option D correctly separates measured production from broader welfare; the other options wrongly assume that cost automatically determines total welfare.

Related tags

GdpWelfarePollution ControlHealthEnvironmentGdp And WelfareNational Income And Related AggregatesEconomics

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