In the context of marginal analysis, which of the following scenarios best illustrates the concept of Pareto efficiency when comparing marginal costs and benefits?

Pareto efficiency occurs when resources are allocated in a way that no one can be made better off without making someone else worse off. In marginal analysis, this means comparing the additional benefits of an action to its additional costs. For example, imagine a factory deciding whether to reduce pollution. If the factory finds that the cost of reducing pollution is higher than the benefits gained by the community's improved health, then it may not be Pareto efficient to make that change. However, if the factory can reduce pollution in a way that benefits both the community and itself, while keeping costs low, this situation represents Pareto efficiency.