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?

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Definitions:

Intra-entity Gross Profit

Gross profit that arises from transactions within the same entity, often eliminated in consolidated financial statements.

Consolidation Process

The procedure of combining the financial statements of separate but related entities to present as one entity for financial reporting.

Consolidated Cost Of Goods Sold

The aggregated cost of goods that have been used up in the production of goods or services sold by a company and its subsidiaries.

Year-end

The end of a fiscal year or calendar year, when companies close their books and summarize financial activities.