The graph illustrates the unregulated market for pesticide. When the lactones pr

Question

The graph illustrates the unregulated market for pesticide. When the lactones 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 ions a week. The deadweight lost from pesticide production is $ .

Explanation / Answer

The quantity of pesticide produce dif no one owns the lake is 90 units (where demand equals supply)

deadweight loss = 90*180*2 = 32400 (double the private cost multiplied by equilibrium quantity)

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