The European Union has banned certain pesticides for two years after studies found links between the use of these insecticides and a decline in the bee population. In particular, research has shown that the use of imidacloprid, clothianidin, and thiamethoxam on flowering crops have adversely affected the honeybee population in North America and Europe.
a. Consider the private market for these pesticides. Use supply and demand curves to show the equilibrium level of pesticides that will be produced and consumed.
b. How might the impact of the insecticide on honeybees be modeled as a marginal external cost? Show the deadweight loss from this externality in the graph you drew for the first part of this question.
c. Is the private market outcome socially efficient?