1. The graph below shows the unregulated market for a pesticide. When factories produce pesticide, they create waste and dump it into a lake. Use the graph below to answer the following questions 50 50 Price (dollars per ton) 150 125 28 100 75 X 25 25 0 + 10 D 20 30 40 50 Quantity (tons per week) For this market, suppose the following events occur independently. Illustrate the effect of each event in a separate graph showing the appropriate shift in supply and/or demand for coffee and indicate the effects on the equilibrium price and quantity. Be sure to explain your answer and label your graphs to avoid any misinterpretations. a. The external costs of pollution is $25 at every point of production. Draw the marginal social cost curve on the graph above. b. What is the quantity of pesticide produced if no one owns the lake? c. What is the efficient quantity of pesticide?

1. The graph below shows the unregulated market for a pesticide. When factories produce pesticide, they create waste and dump it into a lake. Use the graph below to answer the following questions 50 50 Price (dollars per ton) 150 125 28 100 75 X 25 25 0 + 10 D 20 30 40 50 Quantity (tons per week) For this market, suppose the following events occur independently. Illustrate the effect of each event in a separate graph showing the appropriate shift in supply and/or demand for coffee and indicate the effects on the equilibrium price and quantity. Be sure to explain your answer and label your graphs to avoid any misinterpretations. a. The external costs of pollution is $25 at every point of production. Draw the marginal social cost curve on the graph above. b. What is the quantity of pesticide produced if no one owns the lake? c. What is the efficient quantity of pesticide?

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section: Chapter Questions

Problem 9PA

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