Thursday, August 23, 2007

Unit 2: Internalising externalities: Rubbish collection

This BBC article seems to suggest households would be willing to pay for the rubbish they put out to be collected

http://news.bbc.co.uk/1/hi/uk/6957814.stm

a) What are the externalities associated with the production of household rubbish?
b) How would this scheme internalise the externalities?
c) Draw a S&D diagram to show the effect of this pay as you throw policy and explain the effect on the market
d) Evaluate how successful you believe such a scheme would be if implemented

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