Determine the effect of the resource misallocation

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Reference no: EM13945592

Consider the following model of a hypothetical market for MSW management services:

MPB = 25 - 2Q
MPC = 4 + Q
MEC = 0.5Q.

where Q is the number of trash containers per household per month.

a. Quantitatively determine the effect of the resource misallocation due to:

(i) the presence of the negative externality, and

(ii) the use of a flat fee pricing system In the presence of a negative externality.

b. Support your answer to pad (a) with a graphical model.

c. Determine the dollar value of a waste-end charge that would restore efficiency to this market. Explain your answer intuitively.

Reference no: EM13945592

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