Posted: November 17th, 2015

negative externality diagram

The production of pharmaceuticals creates a negative externality due to toxic chemical releases. Draw a diagram illustrating the negative externality, the deadweight loss from failure to regulate, and the Pigouvian tax that will yield the socially optimal outcome using each of the following horizontal axes:

(a) Quantity of pharmaceuticals

(b) Quantity of chemical releases

(c) Abatement of chemical releases

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