If a country's real GDP rises by (5%) while the estimated social cost of pollution rises by an amount equal to (7%) of real output which statement about net welfare is more appropriate?

Correct answer: Net welfare may fall if pollution costs exceed the output gain

The governing idea is that net welfare should consider both the benefits of output and the external costs created during production. A 5% real-output gain does not guarantee a welfare gain when pollution costs rise by an estimated 7% of output; the net effect may be negative, although exact welfare requires careful measurement. Option B is correct. A ignores costs, C denies externalities, and D incorrectly adds percentages.