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 the town owns the lake, what is the quantity of pesticide produced and how much does the town charge the factories to dump waste?