The figure shows the unregulated market for a pesticide, where S is the supply curve and D is the demand curve. The demand curve is the same as the MSB curve. When factories produce the pesticide, they also create waste, which they dump into a lake on the outskirts of the town. The marginal external cost of the dumped waste is equal to the marginal private cost of producing the pesticide.
-In the figure above, if no one owns the lake, the market does what?
A) overproduces 120 tons of pesticide
B) underproduces 120 tons of pesticide
C) overproduces 60 tons of pesticide
D) produces the efficient quantity of pesticide

Question

The figure shows the unregulated market for a pesticide, where S is the supply curve and D is the demand curve. The demand curve is the same as the MSB curve. When factories produce the pesticide, they also create waste, which they dump into a lake on the outskirts of the town. The marginal external cost of the dumped waste is equal to the marginal private cost of producing the pesticide.
-In the figure above, if no one owns the lake, the market does what?
A) overproduces 120 tons of pesticide 
B) underproduces 120 tons of pesticide 
C) overproduces 60 tons of pesticide 
D) produces the efficient quantity of pesticide

Quizplus · Accepted Answer

The Answer of  The figure shows the unregulated market for a pesticide, where S is the supply curve and D is the demand curve. The demand curve is the same as the MSB curve. When factories produce the pesticide, they also create waste, which they dump into a lake on the outskirts of the town. The marginal external cost of the dumped waste is equal to the marginal private cost of producing the pesticide.
-In the figure above, if no one owns the lake, the market does what?
A) overproduces 120 tons of pesticide 
B) underproduces 120 tons of pesticide 
C) overproduces 60 tons of pesticide 
D) produces the efficient quantity of pesticide

The Figure Shows the Unregulated Market for a Pesticide, Where