Two pesticides harm bees owned by nearby beekeepers when farmers use them. Each container used creates the same estimated external cost. The government is considering an indirect tax of £6 per container on either pesticide.
| Pesticide | Annual sales before tax (containers) | Forecast annual sales after tax (containers) |
|---|---|---|
| J | 80,000 | 76,000 |
| K | 80,000 | 56,000 |
Compared with taxing pesticide K, which outcome is most likely if the government taxes pesticide J?
It would cause a larger fall in the total external cost and raise more tax revenue.
It would cause a smaller fall in the total external cost and raise more tax revenue.
It would cause a larger fall in the total external cost and raise less tax revenue.
It would cause a smaller fall in the total external cost and raise less tax revenue.
127 exam-style questions on OCR GCSE Economics 3.8 Limitations of markets, covering 3.8.1 Positive and negative externalities, 3.8.2 Policies to correct externalities, 3.8.3 Impact of externality policies, and 3.8.4 Costs and benefits of externality policies. Each one has a worked solution and a mark scheme showing where the marks go.