Question
Consider example of household refuse collection in Minneapolis. Assume that the marginal social cost (MSC) of collecting and disposing of it is $0.15/lb. Suppose that
Consider example of household refuse collection in Minneapolis. Assume that the
marginal social cost (MSC) of collecting and disposing of it is $0.15/lb. Suppose that in
2011 there was a fee of $0.05/lb being charged and the quantity of refuse collected was
2.5lb/p/d. Suppose that in 2012 the fee was $0.1/lb and quantity of refuse collected
was 2.00lb/p/d. Now, government is planning to increase the fee in 2014 to $0.12/lb.
Assuming a constant elasticity demand function, calculate the change in total
surplus from an increase in the fee from $0.10/lb to $0.12/lb.?
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