The heavy application of nitrogen-based chemical fertilisers in commercial agriculture has led to significant runoff into local river basins, causing widespread eutrophication and severe damage to aquatic ecosystems.
"...higher indirect taxes could be levied on chemical fertilisers to increase the marginal private cost of intensive crop production, bringing the price paid closer to the marginal social cost borne by aquatic ecosystems and public water treatment facilities." Lines 14–17
Explain, using an appropriate diagram, how this policy could achieve a more socially efficient allocation of resources.
