What is the tax that achieves the efficient outcome

Reference no: EM132117020

Question: Use the following figure, which illustrates the market for a pesticide with no government intervention, to work.

When factories produce pesticide, they also create waste, which they dump into a lake on the outskirts of the town. The marginal external cost of the waste is equal to the marginal private cost of producing the pesticide is double the marginal private cost).

If no one owns the lake and the government levies a pollution tax, what is the tax that achieves the efficient outcome?

Reference no: EM132117020

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