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 part (a) with a graphi- cal model.
c. Determine the dollar value of a waste-end charge that would restore efficiency to this market. Explain your answer intuitively.