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The graph illustrates the market for pesticide with no government intervention. When the factories produce pesticide, they also create waste, which they dump into a lake on the outskirts of town. The marginal external cost of the waste is equal to the marginal private cost of producing pesticide (that is, the marginal social cost of producing the pesticide is double the marginal private cost.) What is the quantity of pesticide produced if no one owns the lake and what is the efficient quantity of pesticide? If no one owns the lake, the quantity of pesticide produced is 160 tons a week. The efficient quantity of pesticide is tons a week. C 840- 720- 600- 480- 360- 240- 120- Price (dollars per ton) 40 80 120 160 Quantity (tons of pesticide per week) S D 200

The graph illustrates the market for pesticide with no government intervention. When the factories produce pesticide, they also create waste, which they dump into a lake on the outskirts of town. The marginal external cost of the waste is equal to the marginal private cost of producing pesticide (that is, the marginal social cost of producing the pesticide is double the marginal private cost.) What is the quantity of pesticide produced if no one owns the lake and what is the efficient quantity of pesticide? If no one owns the lake, the quantity of pesticide produced is 160 tons a week. The efficient quantity of pesticide is tons a week. C 840- 720- 600- 480- 360- 240- 120- Price (dollars per ton) 40 80 120 160 Quantity (tons of pesticide per week) S D 200

Principles of Microeconomics
Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter10: Externalities
Section: Chapter Questions
Problem 10PA
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The graph illustrates the market for pesticide with no government intervention. When the factories produce pesticide, they also create waste, which they dump into a lake on the outskirts of town. The marginal external cost of the waste is equal to the marginal private cost of producing pesticide (that is, the marginal social cost of producing the pesticide is double the marginal private cost.) What is the quantity of pesticide produced if no one owns the lake and what is the efficient quantity of pesticide? If no one owns the lake, the quantity of pesticide produced is 160 tons a week. The efficient quantity of pesticide is tons a week. C… 840- 720- 600- 480- 360- 240- 120- 0- 0 Price (dollars per ton) 160 40 80 120 Quantity (tons of pesticide per week) S D 200 C
Transcribed Image Text:The graph illustrates the market for pesticide with no government intervention. When the factories produce pesticide, they also create waste, which they dump into a lake on the outskirts of town. The marginal external cost of the waste is equal to the marginal private cost of producing pesticide (that is, the marginal social cost of producing the pesticide is double the marginal private cost.) What is the quantity of pesticide produced if no one owns the lake and what is the efficient quantity of pesticide? If no one owns the lake, the quantity of pesticide produced is 160 tons a week. The efficient quantity of pesticide is tons a week. C… 840- 720- 600- 480- 360- 240- 120- 0- 0 Price (dollars per ton) 160 40 80 120 Quantity (tons of pesticide per week) S D 200 C
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