1 212 3 1

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 SR F R D R D D R R DOO D R D D OO DO PS D
the industrial zone in Viotia, is being used by a number of manufacturing �rms to dispose of
toxic waste, severely contaminating nearby Asopos River.

 Researchers from Athens University have con�rmed that river water has a concentration of
148 micrograms (mcg) of depleted chromium per kilogram (kg), and that local water is not
DEO IR D R R N

 High traces of toxins in river water have contaminated agricultural produce on sale in the
RS D PD N RI D D 7 R FD R IR DPSO DO FR F D R
of 663 mcg of nickel per kg, nearly six times higher than the international maximum level.
Local residents also claim the U PD IDF D PSR D
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 7 ( RS D ( R P RPP R D F F R P IR ID O
to introduce necessary policies to deal with the problems caused by the toxins in the river.
The government responded by announcing that U F F OD R D Z
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manufacturers 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 �rms to trade
them to achieve the optimal level of pollution has many theoretical advantages. However,
these may be administratively complicated as there are many �rms involved and they are
PDOO

[Source: adapted from http://www.ekathimerini.com, 17 February 2009 and 7 March 2009]

VT V Q Q Q V Q Q S
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(a) De�ne the following terms indicated in bold in the text:

D DO S S  NV

F D S S  NV

(b) Using an appropriate diagram, explain why illegal dumping of toxic waste by
these manufacturing �rms is an example of a market failure S S  NV

(c) Using an appropriate diagram, explain the expected effect on the local carrot
PD N O I RP FR DP D R RI S S  NV

(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. NV