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.
Frequently asked questions
What is the correct answer to this question?
Measured output growth may slow while health benefits raise welfare
Why is this the correct answer?
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.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates. Topic: GDP and Welfare.
