The graph illustrates the unregulated market for pesticide. When the factories p

Question

The graph illustrates the unregulated market for pesticide. When the factories produce pesticide, they also create waste which they dump into a lake on the outskirts of a small town. The marginal external cost of the dumped waste is equal to twice the marginal private cost. So the marginal social cost of producing pesticide is three times the marginal private cost. What is the quantity of pesticide produced if no one owns the lake? What is the deadweight loss from pesticide production? The quantity of pesticide produced if no one owns the lake is tons a week. The deadweight loss from pesticide production is

Explanation / Answer

Answer to 1st blank: 90

Answer to 2nd blank: $4050 (Explanation: $180 x 45 /2 = 4050)

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