Suppose Unregulated Production of Pesticides Results in an Equilibrium Price

question 10

Essay

Suppose unregulated production of pesticides results in an equilibrium price and quantity of $400 and 1,000 tons per day,respectively,and a marginal external cost of $10 a ton.
a.If the government were to eliminate the external cost by using pollution charges,what should the pollution charge be set at?
b.If the government were to eliminate the external cost by using taxes,what should the tax equal?
c.Would the government actions described above affect the quantity of pesticides produced? If yes,how? If no,why not?

---

Definitions:

Progressive Income Tax

A tax system where the tax rate increases as the taxable amount or income of the taxpayer increases.

Residential Property

Property designated for living or dwelling for individuals or families.

Regressive Tax

A tax system where the tax rate decreases as the taxpayer’s income increases, placing a higher relative burden on those with lower incomes.

Tax Schedules

Detailed charts or tables used by taxpayers to determine their tax obligations based on their income levels.