-The Above Figure Shows the Market for Fertilizer

question 2

Essay

-The above figure shows the market for fertilizer. When fertilizer is applied to lawns, it runs off into neighboring streams and ponds, killing fish and creating an external cost.
a) What is the equilibrium price and quantity of fertilizer in an unregulated, competitive market?
b) What is the efficient quantity of fertilizer?
c) Suppose government imposes a tax equal to the marginal external cost. What is the equilibrium price paid by consumers and the equilibrium quantity after implementation of the tax?
d) At the output level in part (c), how much is the tax?
e) How much tax revenue does government collect?
f) What is the deadweight loss borne by society if the externality is left uncorrected?

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Definitions:

Human Ecology Theory

A framework in sociology that examines the relationships between humans and their environments, focusing on how social order is maintained amidst environmental forces.

Ethnic Restaurants

Establishments that serve traditional foods from specific nations or cultural groups.

Social Landscape

Refers to the cultural and societal makeup, including norms, values, and social structures that characterize a society at a given time.

Chicago School

A school of economic thought associated with the University of Chicago, emphasizing free-market principles and minimal government intervention.