Study the extract below and answer the questions that follow.

Toxic dump near Asopos River investigated

1.An Athens prosecutor has ordered an investigation into allegations that an illegal dump nearthe industrial zone in Viotia, is being used by a number of manufacturing firms to dispose of toxic waste, severely contaminating nearby Asopos River.

2.Researchers from Athens University have confirmed that river water has a concentration of 148 micrograms (mcg) of depleted chromium per kilogram (kg), and that local water is notsuitable for irrigation or drinking.

3.High traces of toxins in river water have contaminated agricultural produce on sale in theshops and street markets of the area. Tests on carrots, for example, revealed concentrationsof 663 mcg of nickel per kg, nearly six times higher than the international maximum level. Local residents also claim thenegative externalitiesthese manufacturers have imposed have caused an increase in cancer-related deaths.

4.The European Environment Commissioner has criticized the government for failingto introduce necessary policies to deal with the problems caused by the toxins in the river. The government responded by announcing thatindirect taxes, direct regulation and new legislation are being considered to solve the problem. Indirect taxes could force pollutingmanufacturers to take all costs into consideration, but estimating the size of the necessary tax is complicated. A proposal that the government issues pollution permits allowing firms to trade them to achieve the optimal level of pollution has many theoretical advantages. However, these may be administratively complicated as there are many firms involved and they aresmall in size.

1. (a)Define the following terms indicated in bold in the text:
2. (i)negative externalities(paragraph3)
3. (ii)indirect taxes(paragraph4).
4. (b)Using an appropriate diagram, explain why illegal dumping of toxic waste by these manufacturing firms is an example of a market failure(paragraph 1).
5. (c)Using an appropriate diagram, explain the expected effect on the local carrotmarket resulting from the contamination of the river(paragraph 3).
6. (d)Using information from the text/data and your knowledge of economics, evaluate the solutions that the government could employ to reduce the negative externalities caused by river pollution in Viotia.