PLEASE HELP WILL RATE! The market price of insecticide is initially $9 per unit.

Question

PLEASE HELP WILL RATE!

The market price of insecticide is initially $9 per unit. To address a negative externality in this market, the government decides to charge producers of insecticide for the privilege of polluting during the production process. A fee that fully takes into account the social costs of pollution is determined, and once it is put into effect, the market supply curve for insecticide shifts upward by $6 per unit. The market price of insecticide also increases, to $13 per unit. What fee is the government charging insecticide manufacturers? S6 (Enter a numeric response using an integer)

Explanation / Answer

The fee that government is charging insecticide manufacturers = New equilibrium price in the market after social cost is taken into account - AMount by which the supply curve has shifted leftwards = 13 - 6 = $7.

Thus, government is charging fee of $6 from insecticides manufacturers.

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