In an effort to cut down on garbage, Custodial Staff remove all the garbage/recycling/compost cans from buildings. Now, students must hold on to their daily garbage and throw it away once back at their dorm/apartment, as each dorm / apartment will have a single large set of compost/garbage/recycling dumpsters. As this policy takes effect, the demand for littering spikes. Suppose the private marginal benefit for littering on campus is given by the following equation: PMB = 10-(Q/10), where Q is number of average-sized items littered in the course of a day. The benefit reflects students’ WTP to avoid the hassle of carrying trash, especially items which are oozy and will leak on clothes. The private marginal cost of littering is constant at 0.50 per item because students prefer a clean campus.
How many items are littered each day? (the market quantity).
The equilibrium market quantity can be calculated at the point: PMB
= PMC
That is,
10 – Q/10 = 0.5
9.5 = Q/10
Q* - 95
Thus, 95 items will be littered each day.
In an effort to cut down on garbage, Custodial Staff remove all the garbage/recycling/compost cans from...