a) With no pollution control, what is the quantity of chemical produced, the price of the chemical per tonne, and the marginal external cost of the pollution generated?
b) With no pollution control, what is the marginal social cost of the chemicals produced and the deadweight loss?
c) Suppose that the government levies a tax on the producers, such that the market produces the efficient quantity. What is the price of the chemical per tonne, the tax per tonne, and the tax revenue per day?
d) Draw a diagram to illustrate all of the above.
e) Assuming there are a small number of parties involved in this chemical market, and that transactions costs are low, outline another way (apart from the tax) that the externality issue could be dealt with
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